DEVELOPING NEXT-GENERATION LEADERSHIP TALENT IN FAMILY BUSINESSES: THE FAMILY EFFECT STEPHEN P. MILLER

Transcription

1 DEVELOPING NEXT-GENERATION LEADERSHIP TALENT IN FAMILY BUSINESSES: THE FAMILY EFFECT by STEPHEN P. MILLER Submitted in partial fulfillment of the requirements For the degree of Doctor of Philosophy Dissertation Committee: Richard E. Boyatzis, Ph.D., Case Western Reserve University (chair) Kalle J. Lyytinen, Ph.D., Case Western Reserve University Diana Bilimoria, Ph.D., Case Western Reserve Universtiy Simon I. Peck, Ph.D., Case Western Reserve University Weatherhead School of Management Designing Sustainable Systems CASE WESTERN RESERVE UNIVERSITY May, 2015

2 CASE WESTERN RESERVE UNIVERSITY SCHOOL OF GRADUATE STUDIES We hereby approve the thesis/dissertation of Stephen P. Miller candidate for the Doctor of Philosophy degree*. (signed) Richard E. Boyatzis (chair of the committee) Kalle J. Lyytinen Diana Bilimoria Simon I. Peck (date) February 27, 2015 *We also certify that written approval has been obtained for any proprietary material contained therein.

3 Copyright by Stephen P. Miller, 2015 All Rights Reserved

4 Dedication This work is dedicated to my wife, Debbie, whose steadfast love and wise counsel I cherish, and for which I am profoundly grateful. Many women do noble things, but you surpass them all. Proverbs 31:29. And to Stephanie, Michelle, Dan, and Henry, the next-generations in our family who shine a bright light forward towards a better world. iv

5 Table of Contents List of Tables... xii List of Figures... xvi Acknowledgements... xviii Abstract... xxi CHAPTER I: INTRODUCTION...1 Research Motivation... 1 Introduction and Problem of Practice... 2 Gaps in the Research, Study Goals, and Research Questions... 6 Gaps in the Research... 6 Study Goals and Research Questions... 8 Literature Review and Development of Theoretical Framework Family Business Theories Leadership Theories and Effective Leadership Full-Range Leadership Theory Authentic Leadership Theory Leader-Member Exchange Theory (LMX) Complexity Leadership Theory Competency-Based Emotional and Social Intelligence Summary of Leadership Theories and Effective Leadership Work Engagement Responsibility and Accountability Motivation for Working in the Family Business Family Climate Social Identification Theory and Bowen Family Systems Theory Experiential Development Mentoring Formal Leadership Training, Undergraduate and Graduate Classes Intentional Change Theory Integration of Research Questions, Theory, and Research Design Overarching Theoretical Framework Mixed-Methods Research Design Exploratory Sequential Study Design v

6 Phase 1 Qualitative Study Phase 2 Quantitative Study Phase 3 Quantitative Study Integration of the Three Phases Remaining Chapters CHAPTER II: DEVELOPING LEADERSHIP TALENT IN FAMILY BUSINESSES: EMBRACING RISK OR PLAYING IT SAFE...64 Introduction Literature Review and Theoretical Framework Emotional and Social Intelligence Experiential Development Mentoring and Coaching Leadership Training and Graduate Programs Intentional Change Theory and Relational Climate Leadership Talent Effective Family Business Leadership Methods Methodology Sample Data Collection Data Analysis Findings Discussion Limitations Implications for Practice and Future Research CHAPTER III: DEVELOPING NEXT-GENERATION LEADERSHIP TALENT IN FAMILY BUSINESSES: FAMILY CLIMATE MATTERS Introduction Theoretical Foundation, Hypothesis Development, and Conceptual Model Effective Leadership Work Engagement Emotional and Social Intelligence Motivation for Working in the Family Firm Responsibility and Accountability vi

7 The Three-Systems Model of Family Enterprise Family Climate Intentional Change Theory and Family Business Climate Research Design and Methods Multi-Rater Cross Sectional Design Measurement Development Emotional and Social Intelligence Family Climate Family Business Climate Leadership Effectiveness Motivation to Work in the Family Business Responsibility and Accountability Work Engagement Pre-Testing Q-sort Online Pre-Test of Questionnaire Data Collection and Sample Data Analysis Data Screening Measurement Model Analysis Family Business Climate (n=567) Emotional and Social Intelligence (n = 382) Responsibility, Accountability, and Leadership Effectiveness (n=382) Family Climate (n=265) Utrecht Work Engagement and Motivation to Work in the Family Business (n = 185) Creating the Structural Equation Model Measurement Model Analysis in Smart PLS Findings Structural Model Analysis in Smart PLS Collinearity Assessment of Predictor Variables Significance of Path Coefficients Family Business Climate Mediation Results Total Effects vii

8 Effect Size f² Predictive Relevance Controls Post-Hoc Analysis Structural Model Analysis of Revised Model in Smart PLS Collinearity Assessment of Predictor Variables Significance of Path Coefficients Total Effects Mediation Analysis Effect Size f² Predictive Relevance Discussion Summary of Major Findings Family Climate Emotional and Social Intelligence Accountability Family Business Climate Internal Motivation Responsibility Controls Limitations and Future Research Conclusion and Implications for Practice CHAPTER IV: DEVELOPING NEXT-GENERATION LEADERSHIP TALENT IN FAMILY BUSINESSES: THE EFFECTS OF SELF-AWARENESS AND LEADERSHIP DEVELOPMENT EXPERIENCES Introduction Theoretical Foundation, Hypothesis Development, and Conceptual Models Effective Leadership Emotional and Social Intelligence Work Engagement Self-Awareness Family Climate Experiential Development Mentoring viii

9 Formal Leadership Training, Undergraduate and Graduate Classes Research Design and Methods Multi-Rater Cross Sectional Design Measurement Development: Part Emotional and Social Intelligence Family Climate Leadership Effectiveness Work Engagement Measurement Development: Part Leadership Development Experiences Pre-Testing Q-sort Online Pre-Test of Questionnaire Data Collection and Sample Data Screening Data Analysis: Part Measurement Model Analysis: Part Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Competencies (n = 100) Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence Competencies (n = 100) Combined Multi-Rater and Self-Assessment of Next-Generation Leader Emotional and Social Intelligence Competencies (n = 567) Full Measurement Model (n=100) Test for Common Method Bias Findings: Part Structural Model and Independent Samples T-Test Analyses Collinearity Assessment of Predictor Variables Significance of Path Coefficients Coefficients of Determination Results of Hypothesis Testing Controls Post-Hoc Analyses: Part Discussion: Part ix

10 Data Analysis: Part Measurement and Structural Equation Model Analysis: Part Next-Generation Leader Assessment of Leadership Development Experiences (n = 100) Measurement Model Analysis in Smart PLS Test for Common Method Bias Findings: Part Structural Model Analysis in Smart PLS Collinearity Assessment of Predictor Variables Significance of Path Coefficients Effect Size f² Predictive Relevance Results of Hypothesis Testing Un-hypothesized relationships Controls Post-Hoc Analyses: Part Post-Hoc Analysis 1: Perceived Impact of Leadership Development Experiences Post-Hoc Analysis 2: A More Complete Explanation of the Effects of Leadership Development Experiences on Leadership Effectiveness and Work Engagement Family Climate Responsibility Accountability Internal Motivation Introjected Regulation Measurement Model Analysis in Smart PLS Post-Hoc Structural Model Analysis in Smart PLS Collinearity Assessment of Predictor Variables Significance of Path Coefficients Effect Size f² Predictive Relevance Results Total Effects Discussion: Part x

11 Limitations and Future Research Conclusion and Implications for Practice CHAPTER V: INTEGRATED FINDINGS AND DISCUSSION Summary of Integrated Findings CHAPTER VI: CONCLUSION Contributions to Theory Implications for Practice Limitations Future Research Closing Thoughts REFERENCES Appendix A. Emotional and Social Intelligence Leadership Competencies Appendix B. Interview Protocol Appendix C. Interrater Agreement on Presence of Themes Appendix D. Presence of Themes in All 37 Interviews Appendix E. Construct Definitions and Measurement Scales Appendix F. Survey Items Appendix G. Common Method Bias Test Results Appendix H. CFA Measurement Models (AMOS) Appendix I. Matched Data Set (n=100) Base Case Structural Equation and Measurement Model (Smart PLS) CFA and SEM Analyses Appendix J. AMOS CFA Measurement Models Part Appendix K. Common Method Bias Test Results Part 1: Multi-Rater and Self- Assessments of Next-Generation Leader Emotional and Social Intelligence Matched Data Set (n = 100) Appendix L. Smart PLS Measurement and Structural Equation Models Part xi

12 List of Tables Table 1. Key Theories/Literature Informing Study Table 2. Emotional and Social Intelligence Leadership Competencies Table 3. Integration of Research Questions, Theory, and Mixed Methods Research Design Table 4. Summary of Study Findings Table 5. Sample Characteristics Table 6. Summary of Findings Table 7. Respondent Sample Characteristics Table 8. Family Business Sample Characteristics Table 9. Family Business Climate EFA Measurement Model Results (n = 567) Table 10. Family Business Climate CFA Measurement Model Results (n = 567) Table 11. Emotional and Social Intelligence EFA Measurement Model Results (n = 382) Table 12. Emotional and Social Intelligence CFA Measurement Model Results (n = 382) Table 13. Leadership Effectiveness, Responsibility, Accountability, and Performance Evaluation EFA Measurement Model Results (n = 382) Table 14. Emotional and Social Intelligence, Leadership Effectiveness, Responsibility and Accountability CFA Multi-Rater Measurement Model Results (n = 382) Table 15. Family Climate EFA Measurement Model Results (n = 265) Table 16. Family Climate CFA Measurement Model Results (n = 265) Table 17. Utrecht Work Engagement and Motivation to Work EFA Measurement Model Results (n = 185) Table 18. Utrecht Work Engagement and Motivation to Work CFA Measurement Model Results (n = 185) Table 19. Next-Generation Leadership Model Base Case Smart PLS CFA Measurement Model Results (n = 100) Table 20. Next-Generation Leadership Model Base Case Correlations Matrix Table 21. Next-Generation Leadership Model Base Case Smart PLS Measurement Model Collinearity Assessment Table 22. Significance Testing Results of the Base Case Structural Model Path Coefficients Table 23. Summary of Hypothesis Test Results Table 24. Significance Testing Results of the Base Case Total Effects xii

13 Table 25. Base Case f² and q² Effects Table 26. Base Case Endogenous Latent Variable R² and Q² Values Table 27. Next-Generation Leadership Revised Model Collinearity Assessment Table 28. Significance Testing Results of the Revised Structural Model Path Coefficients Table 29. Significance Testing Results of the Revised Model Total Effects Table 30. Revised Model Mediation Test Results Table 31. Revised Model f² and q² Effects Table 32. Revised Model Endogenous Latent Variable R² and Q² Values Table 33. Total Effects of Family Climate and Intergenerational Authority Table 34. Total Effects of Responsibility Table 35. Respondent Sample Characteristics Table 36. Family Business Sample Characteristics Table 37. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence EFA Results (n = 100) Table 38. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence CFA Results Table 39. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Correlations Matrix Table 40. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence EFA Results Table 41. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence CFA Results Table 42. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence Correlations Matrix Table 43. Multi-Rater and Next-Generation Leader Self-Assessments of Emotional and Social Intelligence Combined EFA Results (n = 567) Table 44. Multi-Rater and Next-Generation Leader Self-Assessments of Emotional and Social Intelligence CFA Results (n = 567) Table 45. Multi-Rater and Next-Generation Leader Self-Assessments of Emotional and Social Intelligence Combined Correlations Matrix Table 46. Intergenerational Authority, Leadership Effectiveness, Open Communication, and Work EFA Results (n = 100) Table 47. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Full Measurement Model CFA Results (n = 100) Table 48. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Full Measurement Model Correlations Matrix xiii

14 Table 49. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Collinearity Assessment of Predictor Variables Table 50. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Mediation Test Results Table 51. Emotional and Social Intelligence Difference Scores Leadership Effectiveness Groups Table 52. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Summary of Hypothesis Testing Results Table 53. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Significance Test Results of Structural Equation Model Path Coefficients Table 54. Emotional and Social Intelligence Difference Scores Leadership Position Groups Table 55. Emotional and Social Intelligence Difference Scores Effect on Leadership Effectiveness Table 56. Effect of Open Communication on Emotional and Social Intelligence Difference Scores Leadership Position Groups Table 57. Next-Generation Leader Assessment of Leadership Development Experiences EFA Results (n = 100) Table 58. Next-Generation Leader Assessment of Leadership Development Experiences Smart PLS Measurement Model CFA Results (n=100) Table 59. Next-Generation Leader Assessment of Leadership Development Experiences Correlations Matrix (n = 100) Table 60. Next-Generation Leader Assessment of Leadership Development Experiences Collinearity Assessment of Predictor Variables Table 61. Next-Generation Leader Assessment of Leadership Development Experiences Significance Test Results of Structural Model Path Coefficients Table 62. Next-Generation Leader Assessment of Leadership Development Experiences Summary of Hypothesis Testing Results Table 63. Next-Generation Leader Assessment of Leadership Development Experiences f² and q² Effects Table 64. Next-Generation Leader Assessment of Leadership Development Experiences Endogenous Latent Variable R² and Q² Values Table 65. Impact of Next-Generation Leadership Development Experiences Table 66. Linear Regression Results for Leadership Development Experiences Not Included in Leadership Development Constructs xiv

15 Table 67. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Smart PLS Measurement Model Confirmatory Factor Analysis Results (n=100) Table 68. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Correlations Matrix (n = 100) Table 69. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Collinearity Assessment of Predictor Variables Table 70. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Significance Test Results of the Structural Model Path Coefficients Table 71. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis f² and q² Effects Table 72. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Endogenous Latent Variable R² and Q² Values Table 73. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Mediation Test Results Table 74. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Significance Test Results of the Structural Model Total Effects Table 75. Integrated Findings xv

16 List of Figures Figure 1. Research Questions Addressed in Each Phase of the Study Figure 2. Three-Systems Family Business Model Figure 3. Next-Generation Family Business Leader Development Theoretical Framework Figure 4. Study Diagram and Integration of Mixed Methods Figure 5. Early Leadership Learning Experiences Figure 6. Job Assignments with Authentic Responsibility and Accountability Figure 7. Demonstrating Emotional and Social Intelligence Figure 8. Engaging in Personal Reflection Figure 9. Being Shielded from Risk and/or Consequences of Failure Figure 10. Obligatory or Entitled Motivations for Joining the Family Business Figure 11. Family Business Characterized by Unresolved Conflict Figure 12. Being Promoted to Leadership Positions which Not Qualified Figure 13. Conceptual Framework of Factors that Influence Leadership Development in Family Businesses Figure 14. Three-Systems Family Business Model Figure 15. Three-Systems Family Business Model Figure 16. Next-Generation Leadership Effectiveness and Work Engagement Conceptual Model Figure 17. Data Analysis Flow Chart Base Case Figure 18. Next-Generation Leadership Effectiveness and Work Engagement Final Revised Structural Model Figure 19. Data Analysis Flow Chart Post-Hoc Analysis Revised Structural Equation Model Figure 20. Part 1 Conceptual Model: Effects of Next-Generation Leader Self-Awareness on Leadership Effectiveness and Work Engagement Figure 21. Part 2 Conceptual Model: Effects of Leadership Development Experiences on Next-Generation Leader Effectiveness Work Engagement Figure 22. Research Methods Flow Chart Figure 23. Three-Systems Family Business Model Figure 24. Effects of Next-Generation Leader Assessment of Leadership Development Experiences on Leadership Effectiveness and Work Engagement xvi

17 Figure 25. Effects of Next-Generation Leader Assessment of Leadership Development Experiences on Leadership Effectiveness and Work Engagement Post-Hoc Analysis Figure 26. Next-Generation Family Business Leader Development Model Figure 27. Next-Generation Family Business Leader Intentional Change Model Figure H1. Family Business Climate Figure H2. Emotional and Social Intelligence Figure H3. Emotional and Social Intelligence, Responsibility, Accountability, and Leadership Effectiveness Figure H4. Family Climate Figure H5. Utrecht Work Engagement and Motivation to Work Figure J1. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Matched Data Set (n = 100) Figure J2. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence Matched Data Set (n = 100) Figure J3. Multi-Rater and Self-Assessments of Next-Generation Leader Emotional and Social Intelligence Full Data Set (n = 567) Figure J4. Full Measurement Model: Multi-Rater and Self-Assessments of Next- Generation Leader Emotional and Social Intelligence Matched Data Set (n = 100) Figure L1. Base Case Model: Next-Generation Leader Assessment of Leadership Development Experiences Matched Data Set (n = 100) Figure L2. Post-Hoc Model: Next-Generation Leader Assessment of Leadership Development Experiences Matched Data Set (n = 100) xvii

18 Acknowledgements This journey simply would not have been possible without the love and support of my wife, Debbie. Her insights, encouragement, and sacrifice of time make this as much her work as mine. Debbie, thank you for being our family s anchor and source of inspiration. While the work of many scholars informed the study, the thesis relies most heavily on the work of Richard Boyatzis, particularly his landmark research on emotional and social intelligence, intentional change, and leadership development. Richard has been a phenomenal advisor, counselor, and inspiration throughout my journey in Case Western Reserve University s doctoral program. I still haven t figured out how he finds the time he gives so generously to his many students, given his prolific research, publishing, and teaching schedule. Every time I was stuck, he responded almost immediately with exactly the right advice to keep me moving. When I was in Cleveland, he met me for an early breakfast, lunch, or dinner to discuss my latest findings, help me overcome challenges, and keep me on course. Richard, I simply can t find the words to thank you enough, but I can promise to pass it on to my students. I am immensely grateful to Kalle Lyytinen, both for his capable leadership of the Doctor of Management Program, and for serving as my methods advisor for each of the papers that comprise the thesis. Kalle understood what I was trying to accomplish from the beginning and was always able to suggest methods to help me achieve my research goals. Kalle helped me organize my papers to communicate my findings more clearly, and like Richard, was always available to lend the assistance I needed at exactly the right time. xviii

19 I am also grateful to Diana Bilimoria and Simon Peck, who generously agreed to serve as members of my dissertation committee. Their suggestions and guidance, particularly during the period of my oral exams, was quite helpful as my research journey entered the home stretch. The members of the DM class of 2014 and my PhD cohort earned my respect and gratitude as they shared progress on their own research. Wonderfully talented practitioner scholars with diverse interests and research topics, I learned so much from how they approached their studies, and appreciate the input they provided on ways to make mine better. John Neff and Kathy Overbeke, members of previous cohorts who are also family business scholars, receive my thanks for their insights, leads on where to find information, and encouragement. Thanks to everyone associated with Case Western s Doctor of Management Program. Its unique practitioner scholar approach has pioneered a new niche in higher education. Sue Nartker and Marilyn Chorman deserve special mention. As the directors of the program they do a magnificent job of herding cats with grace and patience. Thanks to you both for guiding me through the requirements of the program, connecting me with resources, and making sure I didn t miss deadlines. I will miss your professional assistance and support. This journey would never have taken flight without the support and encouragement of my many friends at the University of North Carolina s Kenan-Flagler Business School. Cooper Biersach, who co-founded UNC s Kenan-Flagler Family Enterprise Center with me and serves as our director, stimulated my thinking about family business leadership, recruited survey participants, helped me communicate my xix

20 findings in ways that resonate with students and practitioners, encouraged me when I grew weary, and did the heavy lifting at the center to allow me time to focus on my research. Kristina Magnuson, our capable administrative assistant, helped create graphics to communicate research results and prepare for my thesis defense. Barry Roberts, Bill Moore, Clay Hamner, Ted Zoller, Doug Shackelford, Jim Dean, and Jean Elia, all leaders at Kenan-Flagler, played key roles in helping make the Family Enterprise Center a reality and continue to support our work there. Ted Zoller and Dave Hofmann recommended Case Western s Doctor of Management Program when they couldn t talk me out of pursuing a PhD at my advanced age. Thanks guys. It turned out to be a fabulous ride. My colleagues at the Family Business Consulting Group helped recruit participants for all three phases of the study and provided input on results at several key junctures. Stephen Schleifer helped with data collection and reminder notices to participants. Thanks to the hundreds of family business leaders who agreed to interviews and took the time to respond to my survey. I hope the research results will help them prepare the next generation in their families for success in business and in life. Finally, I thank the more than 400 family business students who have taken my class at UNC and inspired the research. I have learned more from them than they could possibly have learned from me. xx

21 Developing Next-Generation Leadership Talent in Family Businesses: The Family Effect Abstract by STEPHEN P. MILLER The task of preparing next-generation family members for leadership responsibilities in the family business is too important to leave to chance. There are 17 million family businesses in the United States, and they generate half of the nation s GDP. Familyowned or controlled businesses produce three-quarters of GDP in most other countries and comprise over 80% of businesses in the world s free economies, including a fifth of the companies in the Fortune Global 500. Despite their importance, the survival rate for family enterprises through multiple generations of family ownership is low. Only 30% survive from the first generation to the second, 12% from the second to the third, and 4% from the third to the fourth. Weak next-generation leadership is one of the top three threats to long-term family firm success. Next-generation family business leaders face a set of challenges unique to familyowned businesses. Not only must they meet the challenges of sustaining a successful business, they must also negotiate the complexities of the family and ownership systems that are integral components of family enterprises, often while living in the shadow of a successful entrepreneur who happens to be a father, mother, or other close relative. xxi

22 While there is general agreement in the family business literature about the importance of next-generation leadership, there is a lack of rigorous research on how future leaders are developed in family firms. This study employed an integrated sequential mixed-methods approach to address that gap by identifying and exploring relationships among factors that influence the effectiveness of next-generation family leaders and the degree to which they are positively engaged with their work in the family business. Three phases of research were conducted. The first was a qualitative study of 37 leaders of privately-owned, mid-market family businesses in the United States and Canada. Early leadership learning experiences, emotional and social intelligence, job assignments with real responsibility and accountability, and personal reflection were identified as factors that promote next-generation leader development. Obligatory or entitled motivations for joining the family business, being shielded from risk and/or the consequences of failure, a family environment characterized by unresolved conflict, and being promoted to positions without necessary qualifications were identified as impediments to the acquisition of leadership skill by next-generation leaders. The qualitative results informed by leadership, intentional change, and family systems theories were used to develop a conceptual framework that guided the two quantitative phases of the study. Data was collected from 100 next-generation family firm leaders and 350 family and non-family leaders and employees with whom they work. The first quantitative study found that the degree to which next-generation leaders assumed personal responsibility for their actions and decisions was strongly related to their display of emotional and social intelligence competencies, which in turn, was the xxii

23 major driver of their leadership effectiveness. Next-generation leader acceptance of personal responsibility was also strongly related to the degree to which they were held accountable by others, which positively affected their engagement with work in the family firm. The climate in the business-owning family affected next-generation leader effectiveness and work engagement through its influence on the level of personal responsibility assumed by the next-generation leaders. A family climate characterized by open communication, intergenerational attention to the developmental needs of the next generation, and cognitive cohesion increased next-generation acceptance of personal responsibility. A family climate characterized by an autocratic senior generation that exercises unquestioned authority decreased the degree to which next-generation leaders accepted responsibility. The second quantitative study found that next-generation leaders who were provided with challenging work assignments, meaningful mentoring relationships, and opportunities to receive candid feedback on their leadership behaviors were more likely to become self-aware, effective leaders who derive positive energy, inspiration, and fulfillment from their work in the family firm. Open communication in the businessowning family increased next-generation leader self-awareness and positively affected the expression of emotional and social intelligence competencies in their leadership behaviors, which drove their leadership effectiveness. The study contributes to family business and leadership theory by identifying mechanisms through which the climate of the business-owning family affects nextgeneration leader development. It also suggests that a family climate characterized by an autocratic senior generation may contribute to the low survival rate of family firms xxiii

24 through its negative influence on the acquisition of leadership skills by next-generation family members. The study contributes to family business practice by demonstrating the importance of balancing a focus on the business with a focus on the family, and by identifying ways business-owning families can help next-generation family members develop the skills they need to be effective, engaged leaders of the family enterprise. The study s final, and perhaps most important, message is for next-generation leaders. Ultimately, their leadership effectiveness, as well as the benefits they derive from working in the family firm, is up to them. Key words: emotional and social intelligence, family business, family climate, leadership, leadership effectiveness, motivation, next-generation leader, responsibility, succession, work engagement. xxiv

25 CHAPTER I: INTRODUCTION Research Motivation I grew up in a mom and pop family business and enjoyed a 35-year career as the senior non-family executive of The Biltmore Company, a large family-owned enterprise owned by members of the Vanderbilt family. During my time with The Biltmore Company, we grew the company s revenues forty-fold, created 2,000 jobs, and became the engine for the expansion of the $2 billion tourism industry in Asheville, North Carolina. However, all of that growth occurred after the separation of the organization into two independent companies by the third-generation brothers who each owned fifty percent of the pre-existing firm. The split was a bitter one and fractured the relationship between the two siblings. The separation took place during my first year with the company following business school and was my first exposure to what can go wrong in a family-owned enterprise, including the tremendous personal toll imposed on the family members involved, as well as the effects on employees and the community. I helped the family prepare the company for the transition from the third to the fourth generation of family leadership, a transition which was executed more smoothly, but was not without its share of challenges. Along the way, I developed a keen interest in family business dynamics and an appreciation for the contributions family firms make to the economy and society. That interest led me to suggest the need for education on the unique opportunities and challenges of owning and leading a family enterprise to one of my former professors at The University of North Carolina s Kenan-Flagler Business School. To my surprise, that resulted in an invitation to teach family business principles, as the school recognized that 1

26 many of their students come from business-owning families and others pursue careers working for family enterprises as non-family managers or advisors. As a result, I developed two courses on family business and have been teaching MBA and BSBA students as an adjunct at Kenan-Flagler for ten years. I discovered a great passion for teaching and made the decision several years ago to spend the second half of life helping business-owning families negotiate the complexities of family business management, with a special focus on next-generation leadership. Encouraging next-generation family leaders to become students of family business and providing them with assignments designed to help them open channels of communication with their parents, grandparents, siblings and other family members involved with the family businesses have yielded inspiring success stories. However, much of the research on next-generation leader development is not rigorous and is often anecdotal. This study was motivated by a desire to ensure that what I teach my students, write about, and recommend to family business owners is empirically-based, reliable, and has been rigorously analyzed. Introduction and Problem of Practice Leah is the next-generation CEO of a craft brewer whose entrepreneurial father overcame the challenges of creating a successful start-up family business and pioneered what has become a new industry in his community. Employees at Leah s brewery asked her father to recruit her to become his successor when he began to think about the future of the business as he reached his mid-60s. After several years in sales, Leah, now in her early 40s, earned the top leadership position and the respect of employees, customers, vendors, competitors, and the community in which the business operates. She exudes a 2

27 contagious enthusiasm for the business and articulates a clear vision for growing the business to become the largest craft brewer in the southeastern United States. Jim is one of three third-generation leaders of a large family holding company that owns several high-tech manufacturing companies. Jim s uncle and father built the business by engineering highly specialized parts for the automotive industry, many of which were patented, and then expanded into other industries. Now in his fifties, Jim is burned out and seems weighed down by the burden of overseeing the family enterprise. The holding company s largest division declared bankruptcy under Jim s leadership. Employees don t want to work for Jim and one of his cousins recently sold his share of the holding company and left the firm. Both Leah and Jim are highly intelligent, earned degrees from top universities, and gained valuable work experience outside the family business before returning to their family firms. So what makes Leah an effective next-generation leader who is energized by her work in the family business and Jim a less effective leader who is unfulfilled by his career? The purpose of this study was to shed light on that question. Next-generation family business leaders face a set of challenges unique to familyowned enterprises. Not only must they meet the demands of sustaining a successful business as any business leader must do, but they must also negotiate the complexities of the family and ownership systems that are integral and overlapping components of family enterprises (Gersick, Davis, Hampton, & Lansberg, 1997). They must do this with the knowledge that the multi-generational survival rate for family firms is low. Only 30% of family businesses survive from the first to the second generation of family ownership, 3

28 only 12% survive from the second generation to the third, and only 4% survive from the third generation to the fourth (Poza, 2013). The low survival rate of family firms is an important issue for the families that own them and for the communities and countries in which they operate. There are 17 million family businesses in the United States, and they generate half of the nation s GDP. Family-owned or controlled businesses produce three-quarters of GDP in most other countries and comprise over 80% of businesses in the world s free economies, including a fifth of the companies in the Fortune Global 500 ( They employ more than 75% of the working population globally, and created 86% of all new jobs in the U.S. over the past decade (Poza, 2013). In surveys of family business owners, noted family business expert John Ward (1997) found that weak next-generation leadership was perceived as one of the top three threats to long-term family firm success, along with maturing business cycles and limited access to capital. In his classic work, Family Wealth: Keeping It in the Family, James Hughes argues that the most effective way for business-owning families to preserve and grow their wealth is to develop their human and intellectual capital (Hughes Jr & Hughes, 2004). Unfortunately, most families get that backwards with a focus on ownership structure, estate tax, and investment policies dominating their thinking about succession planning (Morris, Williams, Allen, & Avila, 1997). Effective next-generation leadership is critical for those business-owning families who want the businesses they have worked hard to create to prosper through multiple generations of family ownership. 4

29 So what can family firms do to foster the development of the leadership talent next-generation leaders need to successfully negotiate the complex challenges of leading a multi-generational family-owned enterprise? How can next generation family leaders learn leadership skills and earn the respect of those whom they will lead while often living in the shadow of a successful entrepreneur who built or grew the business; who also happens to be a father, mother, or other close relative? How can next-generation leaders do the hard personal developmental work of differentiating themselves from the family (Kerr, 1988) when so much of their identity is defined by the successful businessowning family (Björnberg & Nicholson, 2012). How can next-generation leaders develop the skills necessary to balance the demands of the business, family, and ownership systems that comprise a family enterprise (Gersick et al., 1997)? And how can next-generation leaders derive positive energy, inspiration, and fulfillment from their work in the family firm? Some research has been done on leadership development in large public corporations (Conger & Benjamin, 1999; McCall Jr, Lombardo, & Morrison, 1988), but there is very little research on how leadership talent is developed in familyowned enterprises. While there is general agreement in the family business literature about the importance of next-generation leadership, there is a need for more rigorous research on how future leaders are developed in family firms (Cabrera-Suárez, 2005; Fiegener, Brown, Prince, & File, 1994). To address this gap in the literature, an integrated mixed method study was conducted to identify and explore relationships among factors that influence the effectiveness of next-generation family leaders and the degree to which they are positively engaged with their work in the family business. There were three phases to the 5

30 study. The first was a qualitative study that explored factors that differentiated exceptional next-generation family firm leaders from those who were below average. The second phase was a quantitative study that was based on the findings of the qualitative study and provided a more precise understanding of the factors that contribute to next-generation leadership effectiveness and work engagement, and the relationships among those factors. The third phase was a quantitative study that explored the effects of next-generation self-awareness and specific leadership development experiences on their acquisition of leadership skills, motivations for working in the family business, and engagement with their work in the family firm. The remainder of Chapter 1 identifies gaps in the research on next-generation family business leaders, establishes the study goals, specifies the research questions, provides a review of the literature that informed the development of a theoretical framework, and describes the research design. It is followed by Chapters 2 4, each of which is a complete research paper on one of the three phases of the research. Chapter 5 integrates the findings of all three phases and interprets results. Chapter 6 provides topline conclusions and includes study limitations, contributions to theory, implications for practice, suggested future research, and some closing thoughts. Gaps in the Research, Study Goals, and Research Questions Gaps in the Research Most of the literature relative to next-generation family business leaders is related to succession. Handler (1994) identified five main streams of family firm succession research: (1) succession as a process, (2) the role of the founder, (3) multiple levels of analysis, (4) the perspective of the next generation, and (5) succession outcomes. 6

31 Examples include the process of selecting the successor CEO (Sharma, Chrisman, & Chua, 2004), the exit style of the incumbent family CEO and how that style affects the way in which the succession drama plays out (Sonnenfeld & Spence, 2005), desired successor attributes (Sharma et al., 2004), and successor motivations (Sharma & Irving, 2004). Morris, Williams, Allen, and Avila (1997) found that leadership transitions in family businesses are smoother when heirs are better prepared, but there is very little empirical evidence on how next-generation leaders actually develop the leadership skills they need to become effective leaders. Leadership succession in family firms is different from succession in non-family businesses in two important ways. First, family business succession is a process influenced by the interaction among three family business systems: the family system, the ownership system, and the business system (Gersick et al., 1997). In a family firm, succession can be affected as much or more by family relationships and ownership structures as it is by the needs of the business for capable leadership. Next-generation family members are often chosen for leadership positions in the family business because they are related to the primary owners rather than for their qualifications and experience. Next-generation leaders of non-family businesses are more likely to be selected because of their demonstrated track record of effective leadership. In addition, Lansberg (1988) found that actors in all three family business systems often conspire to resist the succession process itself, often hanging on to their positions of authority far longer than would be tolerated in a non-family business and beyond their years of peak performance. When senior generation family members hang on to leadership and ownership 7

32 responsibilities too long, they deny next-generation family members opportunities to learn leadership lessons. Second, Fiegener, Brown, Prince, and File (1994) compared leadership development strategies employed by family and non-family businesses and identified meaningful differences. They found that family firms rely more heavily on relationshipbased approaches to successor training including supervisory relationships, mentoring/coaching, and networking; while non-family businesses rely more heavily on task-oriented approaches, including on-the-job experiences, formal coursework, and structured planning. However, the study made no attempt to determine the influence of leadership development experiences on next-generation leader effectiveness. Fiegener and his colleagues called for more research to explore the effects of the underlying family business culture on successor development. This study was designed to fill these two gaps in the research, which informed the goals of the study. Study Goals and Research Questions The study had three major goals that address gaps in the family business literature on succession and the development of next-generation leadership talent: (1) identify key factors that influence next-generation family business leader effectiveness and work engagement, (2) determine the effects of family climate, and (3) explore the impact of leadership development experiences and next-generation leader self-awareness. Six specific research questions guided the research: (1) What factors differentiate next-generation family business leaders perceived to be exceptional from those perceived to be below average? While a great deal of research has been conducted on leadership in general and there are many different 8

33 theories about what makes leaders effective, there is not much rigorous research that focuses on the effectiveness of next-generation leaders in family businesses. As pointed out earlier, leadership of family enterprises is made more complex by the need to negotiate the interactions among the business, family, and ownership systems. Openness to discovering factors that may be important in a family business context that might not be as important in a non-family environment was maintained throughout the study and is reflected in the first three research questions. This question was crafted to guide the study s first qualitative phase which used an extreme case comparison to tease out differences between nextgeneration leaders who were perceived by family business experts as highly effective and those judged to be less effective. (2) What factors influence the leadership effectiveness of next-generation family business leaders and the degree to which they are positively engaged with their work in the family firm? This question was developed to guide the first quantitative phase of the study, which more closely examined the factors identified in the qualitative phase as important to the leadership effectiveness of next-generation leaders. A second dependent variable, work engagement, emerged from the findings of the qualitative phase as the highly effective nextgeneration leaders who participated in the qualitative phase demonstrated higher levels of energy, enthusiasm, and engagement with their work than the less effective leaders. (3) How are these factors related and what do those relationships suggest about how next-generation family leaders develop leadership skills and become engaged 9

34 with their work in the family business? Leadership theory and the results of the qualitative study suggest that many factors influence leadership effectiveness and work engagement. The third question was designed to take advantage of the structural equation modeling techniques used in both quantitative phases of the study to explore direct, mediating, and indirect effects of the variables included in the conceptual models. (4) How does the climate of the business-owning family affect the development of next-generation leadership talent and the degree to which next-generation family leaders are engaged with their work in the family firm? Because leadership development is context specific (Cherniss & Adler, 2000) and family influence is what sets family firms apart from other types of businesses, a particularly important objective of the study was to explore how the climate of the businessowning family affects the development of next-generation family leaders. While the leadership literature suggests that the culture of the families in which all leaders grow up affects their approach to leadership, leaders of non-family businesses are exposed to other values, world views, and leadership styles when they leave their families to pursue careers outside of the family. On the other hand, family culture influences next-generation family leaders throughout their careers working in the family firm, even for those who leave the family business for a while early in their careers to get outside experience. This fourth question is central to all three phases of the study, and it addresses the call for research on the effects of family culture on next-generation leader development mentioned earlier (Fiegener et al., 1994). 10

35 (5) Does next-generation family leader self-perception of leadership behavior predict how others perceive their leadership effectiveness and/or how engaged they are with their work in the family business? Research has shown that leaders in general are not very good judges of how others perceive their leadership behaviors (Podsakoff & Organ, 1986; Taylor, 2014; Tsui & Ohlott, 1988), and that this lack of self-awareness has a negative influence on their leadership effectiveness (Boyatzis & McKee, 2005; Fleenor, McCauley, & Brutus, 1997; Goleman, Boyatzis, & McKee, 2002). Research also suggests that self-efficacy, which is reflective of self-perceptions of leadership behavior, is positively related to work engagement. Next-generation family firm leaders who are also members of the business-owning family often do not receive accurate feedback on their leadership behaviors (Poza, 2013), suggesting that it is may be even less likely they will have accurate self-perceptions than leaders in in other contexts. This research question guided the first part of the second quantitative study which explored the effects of next-generation leader self-awareness to determine if it should be an area of particular focus in developing next-generation leadership talent. (6) What experiences have the greatest impact on the development of leadership skills among next-generation family leaders and the degree to which they are engaged with their work? While much of the leadership literature focuses on identifying effective leader characteristics, surprisingly little research has been done on how leaders develop leadership skills. A landmark study by McCall, Lombardo, and Morrison found that on-the-job experiences had the greatest impact, but that study 11

36 included interviews with leaders of large non-family businesses. The Fiegener, Brown, Prince, and File (1994) study mentioned above found differences in the leadership development strategies employed by family and non-family firms, but made no attempt to measure their effects on leadership effectiveness. This sixth research question guides the second part of the second quantitative study in which the effects of specific leadership development experiences are explored. Research questions addressed in each phase of the mixed-methods study are shown in Figure 1. Figure 1. Research Questions Addressed in Each Phase of the Study 12

37 Literature Review and Development of Theoretical Framework The study employed a multi-disciplinary approach to develop a theory of how next-generation family member leadership talent is developed in a family business context. A number of theories from the leadership, organizational behavior, positive psychology, family systems, and family business disciplines informed the development of an overall theoretical framework and study design and are summarized in the literature review that follows. First, the four major theories of family business are summarized. Next, five of the leading leadership theories are reviewed to shed light on what makes some leaders more effective than others. The literature on work engagement, responsibility and accountability, next-generation family member motivations for working in the family business, the relational climate of the business-owning family, social identification theory, Bowen family systems theory, experiential development, mentoring, formal training programs, undergraduate and graduate classes, and intentional change theory were also reviewed. A summary of the literature and theories that influenced the development of the theoretical frameworks and study designs for each phase of the study, including key concepts, strengths, weaknesses, relevance, and references is provided in Table 1. 13

38 Table 1. Key Theories/Literature Informing Study Theory/Literature Key Concepts Strengths Weaknesses Relevance to study Source Family Business Theories Three-Systems Theory (derived from general systems theory)* Family system Business system Ownership system Communicates complexity of family businesses using simple model. Generalizable to most family businesses. Well-developed framework including relationships among key concepts (Sutton & Staw, 1995; Weick, 1995). Describes overlapping nature of roles of family business actors. Explains that conflict in family businesses results from different perspectives and conflicting roles. Perhaps oversimplification of highly complex system. Incomplete explanation of reasons behind family dynamics. Defines organizational concepts but does not theorize about skills required to negotiate the complexity of family business systems. Provides context for complexity of nextgeneration leader s job in balancing the three systems. Differentiates family business leadership from non-family business leadership. Suggests the need for data collection from family business actors in all three systems. Davis, Hampton, & Lansberg (1997). Agency Theory Overlap in management and ownership may reduce or increase financial and socioemotional costs of operating family enterprise. Based on general agency theory. Provides evidence that family leaders can be less or more costly to family businesses. Does not offer explanation for conditions under which overlap of management and ownership may produce opposite results. Implies that capabilities of next-generation leaders may make the difference between lower and higher agency costs. Poza (2013). 14

39 Resource- Based View Competitive advantage can be created by unique and often idiosyncratic characteristics of family enterprise. Details multiple opportunities for creating competitive advantage including rapid speed to market, focus on market niches, concentrated ownership structure, desire to protect family reputation, patient capital, leadership talent, knowledge transfer from generation to generation, and responsiveness to changes in external environment. Offers no information on leadership qualities necessary to blend resources to create competitive advantage. Identifies leadership talent as family business resource than can be used to create competitive advantage. Provides support for major premise of study that effective nextgeneration leadership talent is a valuable family business resource. Habbershon & Williams (1999). Stewardship Perspective Family business owner s commitment to family enterprise may extend beyond self-interest, motivated by desire to leave positive legacy to succeeding generations. Provides another differentiator of family firms when compared to non-family businesses. Provides explanation for why ownership through multiple generations of family ownership is so important to many family business owners. Explains why family business decisions are often based on more than financial considerations. Overlooks the possibility that such strong personal commitment to the family enterprise may cloud business judgment. Suggests that the motivation of nextgeneration leaders is likely to have meaningful effect on their engagement with work in the family firm. Suggests that such strong commitment to family enterprise may make it even more difficult for senior generation to pass leadership responsibilities on to next generation. Implies that training of next-generation leaders is of paramount Poza (2013). 15

40 Leadership Theories Full-Range Leadership Theory Transformational leadership, transactional leadership, and laissezfaire leadership. Well researched theory that provides evidence of the different outcomes produced when each of the three styles is employed. Demonstrates that a leader s style impacts the degree to which he/she is successful in creating commitment of followers to organizational goals. Singular focus on the individual leader, ambiguity about the underlying processes of leadership, and failure to include dyadic, group, or organizational levels of leadership. importance if family legacy is to continue. Supports view that nextgeneration leadership talent matters. Suggests leadership qualities that may be desirable in nextgeneration leaders. Antonakis, Avolio, & Sivasubramaniam (2003), Bass (1985). Authentic Leadership Theory Adds moral dimension to full-range leadership characteristics. Explains difference in motivations for moral charismatic leaders who produce positive results for the organizations and leaders they serve and for immoral leaders with purely selfish ambitions who produce disastrous results. Includes objectivity, selfregulated behavior guided by internal moral compass, relational transparency Explains why some charismatic leaders produce disastrous results. Emphasizes the importance of leader character to positive organizational outcomes. As with full-range leadership theory, the focus is primarily on the individual leader. Does not offer an explanation for why some moral charismatic leaders may not produce positive organizational results. Suggests that nextgeneration leader character and motivation for working in the family firm are likely to make a difference in leadership effectiveness. Avolio, Walumbwa, & Weber (2009); Bass & Steidlmeier (1999). 16

41 characterized by open communication, internal control of inappropriate expressions of emotion, and self-awareness as characteristic of authentic leaders. Leader- Member Exchange Theory (LMX) Effective leadership processes are the result of mature relationships between leaders and followers who partner to pursue common goals. Leader-follower relationships progress through three stages: stranger, acquaintance, and maturity as the leadership expressed moves from transactional to transformational. Self-interests of leaders and followers are satisfied through commitment to partnership interests between them. Considers the nature of multi-level relationships including dyadic, departmental, organizational, and global in explaining leadership outcomes. Focuses more on the leader-follower or leader-collaborator relationship than on the individual characteristics of the leader. Difficult to measure across multiple relationships. Some critics claim that it is unclear if it is unidimensional or multi-dimensional. Suggests that mature partnership relationships between family owners and leaders increase chances that family and business goals will be achieved simultaneously through operation of family enterprise. Suggests that nextgeneration family leaders will be more effective if they develop the social skills to create LMX s mature partnerships in family and business relationships. Graen & Uhl- Bien (1995). Complexity Leadership Theory Based on the principles of complexity theory including unpredictability, randomness, emergence, resonance, and interactivity. Effective leaders focus on creating favorable Captures the complexity of leadership process. Includes multi-level nature of leadership, allowing for emergence of leadership at all organizational levels. Complexity leadership theory s strength is also its weakness as it deemphasizes the impact of leadership skills of individual leaders within a complex organizational system. Extremely valuable in understanding how the three family business systems interact and how a focus on creating favorable conditions for positive solutions to emerge can produce Marion & Uhl- Bien (2001). 17

42 conditions for innovative solutions to emerge from bottom-up non-linear interactions within and between systems instead of on traditional command and control, transactional, transformational, or charismatic leadership styles. Defines leadership more by effects than by position. It seems plausible to think that skilled individual leaders are necessary to create the conditions called for in complexity leadership theory. more positive results than traditional approaches to leadership. The premise of the study, however, is that next-generation leaders of family firms need effective leadership skills in order to create those conditions. Competency- Based Emotional and Social Intelligence (ESI)* Self-awareness. Self-management. Social awareness. Relationship management. Well researched and established as predictor of leadership effectiveness. Comprehensive framework, including relationships among variables (Weick, 1995). Competency-based ESI is more powerful predictor of leadership effectiveness than the other two streams of emotional intelligence research, ability emotional intelligence and emotional selfefficacy. Measures observable behaviors. ESI competencies can be learned. Some claim it measures such a wide array of skills that it makes theoretical insights more difficult. Leadership theory relied on for this study. Most comprehensive view of leadership talent among leadership theories reviewed. ESI competencies demonstrated to be strong predictor of leadership effectiveness. ESI skills are supremely important in a family business context, as leaders must be attuned to both business and family relationships, which can be emotionally supercharged. ESI competencies can be learned, so there are practical applications of theory for next- Boyatzis &McKee (2005); Cherniss & Adler (2000); Goleman, Boyatzis, & McKee (2002). 18

43 Effective Leadership* Work Engagement* Persuade followers to pursue a common goal. Create commitment in others. Create interpersonal and organizational resonance, positive results, and competitive advantage. Necessary for sustainability of family firms. Correlated with financial performance. Positive opposite of burnout. Central element of wellbeing at work. Positive, fulfilling, workrelated state of mind. Manifested as vigor, dedication, and absorption. Well established and researched concepts. Multiple studies demonstrate characteristics, behaviors and results of effective leadership. Generalizable across many different contexts. Well researched. Easy to detect with selfreport data. Generalizable across most work contexts. Many different labels for similar concepts. Not parsimonious. Organizational performance often indirectly demonstrated or assumed, although some studies have established direct effect. More a list of concepts (processes and outcomes) than a comprehensive theory (Sutton & Staw, 1995; Weick, 1995) Primarily descriptive rather than explanatory. May be influenced by respondent mood when measured, thus not reflective of longerterm state. No attempt to establish relationship among concepts (Sutton & Staw, 1995; Weick, 1995) generation leader development. ESI is context specific so there is an opportunity to make a contribution to family business and leadership literature. Key dependent variable for quantitative phases of study. Ineffective nextgeneration leadership frequently cited as a top reason for low family firm survival rate (Ward, 2007). Secondary dependent variable for quantitative phases of study. Correlated with leadership effectiveness. Bell (1973); Boyatzis & McKee (2005); Collins (2001); Hogan & Kaiser (2005); Nohira, Joyce, & Roberson (2003); Peterson, Smith, Martorana, & Owens (2003); Ward (2007). Schaufeli, Salanova, González-Romá, & Bakker (2002); Seppälä, Mauno, Feldt, Hakanen, Kinnunen, Tolvanen, & Schaufeli (2009). 19

44 Responsibility and Accountability* Self- Determination Theory* Family Climate* Leader acceptance of personal responsibility for own actions and decisions. Stewardship attitude. Leader acceptance of responsibility for organizational results. Leader accepts responsibility for establishing organizatonal vision. Leader held accountable by others for actions and decsions. Amotivation Intrinsic motivation Extrinisic motivation External regulation Introjected regulation Identified regulation Family intergenerational style Attention Authority Family cohesion Cognitive Consistently identified in literature as hallmark of leadership effectiveness. Multi-dimensional concept generalizable across multiple contexts. Research has shown intrinsic and identified regulation produce more positive behavioral, attitudinal, and emotional outcomes. Established and widely accepted theory with well-defined concepts and framework. Synthesizes many family systems theories for specific family business application. Simplicity. More a list of variables than fully developed theory (Sutton & Staw). Difficult for others to know leader s internal state of mind. Complex theory and constructs. Can be difficult to measure to achieve reliability of constructs reflective of theory. Synthesized concepts may fail to fully capture complexity and nuances of family relationships. Next-generation family leaders in family businesses often not held accountable and/or not allowed to assume true responsibility. Quite similar to motivations to work in family business theory, but validated by empirical research. Demonstrates that motivation is likely to be related to engagement with work and leadership effectiveness. Focused on family dynamics known to affect next-generation family member differentiation. Conners, Smith, & Hickman (1994); Fairholm (2001); Kouzes & Posner (2006, 2011); Kraines (2001); Manwaring (1997); Ward (1988, 1997, 2004); Wood & Winston (2005). Deci & Ryan (1985); Gagné, Forest, Gilbert, Aubé, Morin, & Malorni (2010); Sharma & Irving (2004). Björnberg & Nicholson (2007); Danes, Leichtentritt, Metz, & Huddleston-Casas 20

45 Social Identification Theory Bowen Family Systems Theory Intentional Change Theory* Emotional Family process Open communication Adaptabilty Human aggregate (like a family) Emotional commitment Differentiation Fully functioning Psychological health Ideal self Real self Grounded in wellestablished family systems theories and therapies in psychology and medical domains. Excellent definition and analysis of concepts (Weick, 1995) Generalizable Well researched in psychology and sociology domains. Explains effect of family climate on individual development. Well researched. Generalizable. May not fully capture complexity of individual identity with social groups. Complexity. Derived from research in psychiatry domain that demonstrated family effect on schizophrenic patients. May not be generalizable, although widely accepted as such. Broad concepts may not fully capture Has been shown to have strong effect on family business culture and performance. Influence on nextgeneration family leader development. Creates tension between identification with the family and need to differentiate self from the family. Highly relevant to the development of nextgeneration family member leadership skills. Explains importance of achieving differentiation of self from family of origin. Related to selfawareness, selfmanagement, social awareness, and relationship management skills in emotional and social intelligence theory. Provides explanation of how leaders actually (2000); Davis, Hampton, & Lansberg (1997); Ensley & Pearson (2005); Kerr (1988); Poza (2013); Walsh (2003); & Ward (2004). Adler & Adler (1988); Björnberg & Nicholson (2012); O Reilly & Chatman (1986); Riketta (2005); Riketta & Dick (2005). Kerr (1988) Boyatzis & Akrivou (2006); 21

46 Strengths Gaps Learning agenda Experimenting as a leader Practicing being a leader Trusting relationships supportive of change effort Synthesis/extension of established learning theories. Simplicity. Parsimonious. Well-developed framework with clearly established relationships among concepts (Weick, 1995). *Theories that informed the theoretical frameworks for the three phases of the study. complexity and nuances of change. make changes in their behavior to learn leadership skills. Demonstrates the importance of family business climate to nextgeneration leader development. Boyatzis (2008); Cherniss & Adler (2000). 22

47 Family Business Theories Four theories are commonly used to understand and evaluate family businesses: systems theory, agency theory, resource-based view, and the stewardship perspective. Systems theory models family businesses as three overlapping and interdependent subsystems; the family system, the ownership system, and the business system; which interact to create family business dynamics (Gersick et al., 1997). The resource-based view of family firms suggests that competitive advantage is created by unique and often idiosyncratic characteristics of family enterprises, including such traits as rapid speed to market, focus on market niches, concentrated ownership structure, desire to protect the family reputation, patient capital, leadership talent, knowledge transfer between generations, and responsiveness to rapidly changing external environments (Habbershon & Williams, 1999). The stewardship perspective of family enterprises recognizes that owners of family businesses often exhibit a commitment to the mission of the family firm that extends beyond self-interest and is motivated by a desire to leave a positive legacy to succeeding generations. Agency theory views the overlap in ownership and management as having the potential to reduce or increase the financial and socio-emotional costs of operating the family enterprise (Poza, 2013). While all four family business theories outlined above provide insight into family business dynamics, the systems theory is the framework most commonly used by family business academics and consultants to analyze and evaluate family enterprises. The systems theory of family business emphasizes that the overlap among the three subsystems (see Figure 2) often creates conflict among family business actors because of different perspectives on family business issues (Gersick et al., 1997; Poza, 2013). For 23

48 example, a family member who has an ownership stake in the business but is not involved in management (position 4 in Figure 2) is likely to have a different perspective on dividend policy than the family member who has ownership and also serves as the CEO (position 7 in Figure 2). The family owner who is not involved in the management of the business may prefer high dividend payouts, while the family CEO may prefer to retain earnings to reinvest in the business. Or mom, who is a member of the family system but not the business system, may have a much different perspective on junior s performance and position in the family business than dad, the CEO. Effective family business leaders must meet the challenges of sustaining a successful business as any business leader must do, but they must also negotiate the complexities of the family and ownership systems that are integral and overlapping components of family enterprises (Gersick et al., 1997). Negotiating the often conflicting perspectives of members of the three family business systems is what makes family business leadership so different from leadership in other types of organizations. Leaders in public and non-family privately held businesses do not typically have to deal with input from family members in making business decisions. While leaders of non-family firms have to meet owner expectations, those expectations are likely to be focused more exclusively on objective measures of financial returns. Family business owners often have important non-financial goals as well, identified as socio-emotional goals in the family business literature (Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007). In additional to financial returns, their goals may include producing goods or services for which they have a personal passion, reputation in the community, or avoidance of estate taxes. Such goals 24

49 can conflict with business goals, but the family business leader who ignores them does so at his/her peril. The study s theoretical framework is influenced primarily by the systems theory of family business, as it suggests that the dynamics in the family are likely to have an impact on how next-generation family members approach leadership in the family business. While the development of leadership skills for leaders in any context is influenced by the dynamics of the families in which they grew up, leaders of non-family businesses generally work in organizations where there are no family members present, affording them the opportunity to be exposed to different leadership paradigms and ways of doing business that may teach new leadership lessons. On the other hand, family relationships play an important role in the leadership experiences of next-generation leaders of family firms throughout their careers, making it reasonable to think that what happens in the family system shapes the development of their leadership behaviors. Figure 2. Three-Systems Family Business Model Gersick, Kelin E., Davis, John A., Hampton, Marion McCollom, & Lansberg, Ivan Generation to generation: Life cycles of the family business. Harvard Business School Press, Boston. 25

50 Leadership Theories and Effective Leadership While family business is still a relatively new academic field of research, leadership has been studied for centuries. The ancient Greek aphorism know thyself could be considered an early attempt at encouraging the self-awareness that is so essential to leadership effectiveness (Boyatzis & McKee, 2005; Goleman et al., 2002). Despite centuries of study and thought and thousands of studies, there is no one comprehensive theory that fully captures the complexity of leadership (Graen & Uhl-Bien, 1995). Even a definition of leadership is elusive. Kilburg and Donohue (2011) make a heroic attempt, though, when they define leadership as: a complex, multidimensional, emergent process in which the leader(s), follower(s), and other formal and informal stakeholders in a human enterprise use their characteristics, capabilities, thoughts, feelings, and behaviors to create mutually influencing relationships that enable them to coevolve strategies, tactics, structures, processes, directions, and other methods of building and managing human enterprises with the goal of producing adaptive success in their chosen niche(s) in the competitive, evaluative, and evolving global ecology of organizations. Quite a mouthful! Perhaps trying to define leadership is a lot like Justice Potter Stewart s famous attempt at defining pornography in the landmark Supreme Court case of Jacobellis v. Ohio (1964) when he said that while he couldn t define it, I know it when I see it ( In fact, leadership effectiveness is most often measured just that way; by how others perceive the leadership behaviors of the leaders they observe, and was the method used in this study. While Wren (2006) identifies 53 approaches to leadership research, five of the leading theories were reviewed to inform the study: (1) full-range leadership 26

51 theory; (2) authentic leadership; (3) leader-member exchange theory; (4) complexity leadership theory; and (5) emotional and social intelligence. Full-Range Leadership Theory. Full-range leadership theory includes transformational, transactional, and laissezfaire leadership (Antonakis, Avolio, & Sivasubramaniam, 2003; Bass, 1985). Transformational leadership inspires followers through charisma; a strong commitment to values, beliefs, and mission; the ability to communicate an inspirational vision of the future; intellectual stimulation; and individualized attention to the interests and needs of followers. Transactional leadership motivates follower compliance through promises, praise, and/or rewards; and corrects non-compliance with negative feedback, reproof, threats, and/or disciplinary actions (Bass & Steidlmeier, 1999). Laissez-faire leadership refers to a leader s active choice to avoid responsibility, decision-making, and the exercise of authority (Antonakis et al., 2003). While situational in nature, transformational leadership has been found to be generally more effective than transactional leadership, with laissez-faire leadership the least effective of the three (Antonakis et al., 2003). Weaknesses of full range leadership theory include its singular focus on the individual leader, ambiguity about the underlying processes of leadership, and failure to include dyadic, group, or organizational levels of leadership. Charismatic and transactional leadership behaviors are also somewhat ambiguous (Antonakis et al., 2003). Authentic Leadership Theory. Bass and Steidlmeier (1999) add a moral dimension to full-range leadership characteristics in defining authentic leadership, which seeks to differentiate charismatic 27

52 leaders who produce positive results for the organizations they lead from those who use the same characteristics to manipulate followers for their own selfish ambitions. Extreme examples of moral charismatic leaders might include Nelson Mandela, Mother Teresa, and Max De Pree. Extreme examples of immoral charismatic leaders might include Saddam Hussein, Pol Pot, and Adolf Hitler. Avolio, Walumbwa, and Weber (2009) provide a more comprehensive definition of authentic leadership that includes objectively reviewing relevant data and considering multiple perspectives before making a decision, self-regulated behavior guided by an internal moral compass, relational transparency characterized by open communication of one s true thoughts; internal control of inappropriate expressions of emotion; and self-awareness. Research has demonstrated that leaders who exhibit authentic leadership behavior are perceived as more effective than those who do not (Avolio & Gardner, 2005). As with full-range leadership, authentic leadership theory s primary weakness is its focus on the individual leader. It also does not provide an explanation for why a moral charismatic leader may fail to produce positive organizational results. Leader-Member Exchange Theory (LMX). The leader-member exchange (LMX) theory of leadership takes a relationshipbased approach in defining leadership. While the other leadership theories outlined above focus exclusively on leaders, LMX theory also considers followers and the nature of the relationships between leaders and followers. The central concept in LMX is that effective leadership processes are the result of mature relationships between leaders and followers who partner to pursue common goals (Graen & Uhl-Bien, 1995). LMX identifies three stages of the relationship between leaders and follower: (1) stranger; (2) 28

53 acquaintance; and finally (3) maturity. In full-range leadership theory terms, the relationship begins as transactional (stranger) and progresses to transformational (maturity). LMX postulates that mature leader-member relationships result in mutual trust, respect, and obligation and the potential for nearly unlimited influence and positive outcomes. The theory is that the relationship becomes a partnership in which both participants are able to satisfy self-interests by committing to larger partnership interests. When applied to family businesses, LMX suggests that mature partnership relationships between family owners and leaders of the family business are likely to increase the chances that family and business goals will be achieved simultaneously through the operation of the family enterprise. A primary weakness of LMX leadership theory is that it is difficult to measure across multiple relationships. Some critics also claim that it is unclear if LMX is unidimensional or multi-dimensional. Complexity Leadership Theory. Complexity theory has much to offer in explaining how the three sub-systems of family enterprises interact to create family business dynamics, and thus adds to our understanding of family business leadership. Russ Marion and Mary Uhl-Bien (2001), in their award-winning article Leadership in Complex Organizations, apply key principles of complexity theory to the practice of leadership. Their exposition of leadership through the lens of complexity theory has powerful implications for leaders of family firms. As discussed above, family businesses exhibit one of the most fundamental characteristics of complexity theory the interaction of three highly interdependent subsystems. Not only are the interactions between the family, ownership, and business 29

54 systems complex, but each of the systems are individually complex. Marion and Uhl- Bien (2001) postulate that such complex interdependent systems are unpredictable and that leaders who rely on traditional command and control, transformational, transactional, or charismatic leadership styles may well be frustrated in their attempts to create organizational effectiveness. They suggest that leaders learn to capitalize on the resonance, randomness, and interaction in such systems by focusing on creating conditions that encourage innovative solutions to emerge from bottom up non-linear interactions within and between systems. Leaders are advised to serve as catalysts who enable organizational effectiveness rather than trying to dictate or guide outcomes. Marion and Uhl-Bien (2001) advise leaders to foster interaction in such situations to enable system participants to work through conflicting constraints to develop collaborative solutions that meet individual and organizational needs. They argue that solutions that emerge through interaction among the players in systems (adaptive agents in complexity theory) are likely to be more innovative than ones developed by a command-and-control leader, who is constrained by his/her individual capabilities. Further, the emergence of common understanding through such interaction leads to a degree of dynamic stability underneath the randomness (the edge of chaos) of such complex systems. This is consistent with advice that family business consultants and academics offer to family business leaders, who are encouraged to create family councils to discuss family issues, create a shared vision for the family enterprise, and develop family goals and policies. They also advise that family firms establish active boards of directors that include family owners and independent non-family directors to help 30

55 provide insight on changes in the external environment, develop strategy, and ensure that capable management is in place. A weakness in complexity leadership theory is its de-emphasis on the leadership skills of individual leaders within a complex organizational system. Being able to perceive the interactions within a complex system and having the self-awareness, selfmanagement, and social skills to influence rather than direct the activities and outcomes of complex organizations takes a special set of leadership skills, particularly for a system as complex as a family enterprise. Those leadership skills represent the basis for emotional and social intelligence, the leadership theory summarized next, and the one on which has the strongest influence on the study s theoretical framework. Competency-Based Emotional and Social Intelligence. How intelligently leaders identify, understand, and manage their own emotions, and the emotions of those with whom they interact, determines the effectiveness of their leadership behavior and the quality of the relationships they create (Goleman et al., 2002). While technical skills are important to job performance at all levels, when it comes to leadership, research has demonstrated that as much as 90% of a leader s effectiveness is determined by emotional and social intelligence (Cherniss & Adler, 2000). Competency-based emotional and social intelligence theory identifies four domains of emotional and social intelligence: self-awareness, self-management, social awareness, and relationship management (Goleman et al., 2002); and 19 specific competencies associated with the expression of emotional and social intelligence (see Table 2). While it is often assumed that soft-skills like emotional and social 31

56 intelligence competencies are innate or fixed in early childhood, they can in fact be learned (Cherniss & Adler, 2000; Goleman et al., 2002). Reading, lectures, or seminars can help leaders understand emotional and social intelligence concepts, but actually learning emotional and social intelligence skills requires impactful experiential learning (Boyatzis & McKee, 2005; Cherniss & Adler, 2000; Goleman et al., 2002). A boss who models emotional and social intelligence reinforces the same behavior in his/her subordinates and helps them learn and practice emotional and social intelligence skills (Manz & Sims, 1986). Table 2. Emotional and Social Intelligence Leadership Competencies Self-Awareness Self-Management Social Awareness Relationship Management Emotional selfawareness Emotional selfcontrol Empathy Inspirational leadership Accurate self- Transparency Organizational Influence assessment awareness Self-confidence Adaptability Service Developing others Achievement Change catalyst Initiative Conflict management Optimism Teamwork and collaboration Source: Goleman, D., Boyatzis, R. E., & McKee, A. (2002). Primal leadership: Realizing the power of emotional intelligence: Harvard Business Press. Competency-based emotional and social intelligence theory, sometimes referred to as mixed-model or behavioral emotional intelligence, is one of three streams of emotional and social intelligence research, the others being ability emotional intelligence and emotional self-efficacy. Ability emotional research is less susceptible to faking socially desirable responses (Day & Carroll, 2008), but measures answers to abstract questions rather than actual behavior (Petrides & Furnham, 2003). Emotional 32

57 self-efficacy research uses measures more flexible across contexts, but self and other ratings may reflect perceptions rather than actual behavior (Brackett, Rivers, Shiffman, Lerner, & Salovey, 2006; Mayer, Caruso, & Salovey, 2000). Competency-based emotional and social intelligence is a more valid predictor of leadership effectiveness than the other streams of emotional intelligence research (O'Boyle, Humphrey, Pollack, Hawver, & Story, 2011), perhaps because it measures a wider array of behaviors reflective of emotional and social intelligence. It has also been shown to have incremental validity above and beyond cognitive ability and the five-factor model of personality traits (O'Boyle et al., 2011). Emotional and social intelligence has been shown in many different contexts to predict leadership effectiveness and to be correlated with work engagement, so it is at the core of the theoretical framework developed for this study. Competency-based emotional and social intelligence theory is not without its critics. Some claim it measures such a wide array of skills that it makes theoretical insights more difficult (Fiori, 2009). Some even claim that emotional intelligence has no value for leadership theory and practice (Antonakis, 2003; Locke, 2005), but the results of most published studies contradict that claim (Walter, Cole, & Humphrey, 2011). It has also been suggested that emotional intelligence does not necessarily benefit leadership outcomes across all work contexts (Walter et al., 2011). The premise in this paper, however, is that emotional and social intelligence skills are supremely important in a family business context, as leaders must be attuned to both business and family relationships, which can be emotionally super-charged. 33

58 Summary of Leadership Theories and Effective Leadership. As this brief overview of leadership literature demonstrates, there is no shortage of theories about what defines an effective leader. What they all have in common, though, is that leaders with true leadership talent are able to persuade followers to suspend their purely selfish interests to support and work towards a common good (Hogan & Kaiser, 2005). Bell (1973) refers to this leadership quality as the ability to create commitment in others. Boyatzis and McKee (2005) refer to leaders with true leadership talent as resonant leaders, those who have demonstrated that they are able to blend financial, human, intellectual, environmental, and social capital to create positive results and competitive advantage for their organizations (Boyatzis & McKee, 2005). Noted family business expert, John Ward (1997) emphasizes how important effective leadership is to the sustainable growth of a family enterprise, which often determines a family firm s ability to survive through multiple generations of family ownership. Nextgeneration leadership effectiveness was one of two dependent variables used in the structural equation models developed to test hypotheses in the quantitative phases of the study, and the one of primary interest. Work Engagement Work Engagement is the positive opposite of burnout and has been identified in studies of positive psychology as a central element of well-being at work (Seppälä et al., 2009). It can be described as a positive, fulfilling, work-related state of mind that is characterized by vigor, dedication, and absorption (Schaufeli, Salanova, González- Romá, & Bakker, 2002). Next-generation leaders who are more committed to the business, a key to its long-term survival and success (Miller & Breton Miller, 2006), are 34

59 more likely to demonstrate behavior above and beyond what is required by their job description (Dawson, Sharma, Irving, Marcus, & Chirico, 2013), demonstrating a high level of engagement with their work in the family firm. The literature also suggests that leaders with higher levels of emotional and social intelligence are less likely to experience burnout, the polar opposite of engagement with work (Schaufeli & Bakker, 2003). They are also more likely to engage in work that is well aligned with their values, thus generating an enormous amount of energy (Cherniss & Adler, 2000). Work engagement is included as the second focus of the study because it has such important benefits to family businesses and to the next-generation family members who lead them. Some family business research has shown that while family success has a positive influence on business success, the opposite is not always true (Masuo, Fong, Yanagida, & Cabal, 2001). Work engagement is perceived as an indication that nextgeneration family members are benefitting from their work in the family firm at the same time their leadership is benefitting the family business, a highly desirable outcome. Next generation leader work engagement was the second dependent variable in the structural equation models created to test hypotheses in the quantitative phases of the study. Responsibility and Accountability The literature on leadership and organizational behavior consistently identifies the degree to which leaders accept responsibility and are held accountable for their actions and decisions as a hallmark of leadership effectiveness. Wood and Winston (2005) define leader accountability as the leader s willing acceptance of the responsibilities inherent in the leadership position to serve the well-being of the organization. Their 35

60 definition includes the leader s expectation that he or she will also be held accountable by others. Responsible leaders see themselves as stewards of the organizations they lead and keep stakeholders well informed, thus creating greater commitment to the goals of the organization (Fairholm, 2001). They accept responsibility for results, even if circumstances outside their control cause those results to be less than desirable (Conners, Smith, & Hickman, 1994; Kouzes & Posner, 2011; Kraines, 2001; Manwaring, 1997). Not only do they accept responsibility for what has happened in the past, but for establishing a shared vision of the future as well (Kouzes & Posner, 2006; Kraines, 2001). Family business expert John Ward (1988; 1997; 2004b) cites shared vision as one of the most important factors in determining the survival and success of a family enterprise through multiple generations of ownership. It was expected that the degree to which the next-generation leaders in the study accept responsibility and are held accountable for their actions and decisions would influence perceptions of their leadership effectiveness and their engagement with work. Motivation for Working in the Family Business Self-determination theory is a multi-dimensional conceptualization of motivation that has been used to study motivation in a wide variety of contexts including education, sports, work and health care (Deci & Ryan, 1985; Gagné et al., 2010). Selfdetermination theory defines three broad categories of human motivation: amotivation, intrinsic, and extrinsic. Amotivation is defined as the lack of motivation towards an activity. Intrinsic motivation is defined as engaging in an activity because it is inherently enjoyable or interesting. Extrinsic motivation describes the case in which a person 36

61 engages in an activity to earn a reward, achieve recognition, enhance self-esteem, win approval from others, or avoid punishment or criticism (Gagné et al., 2010). Several types of extrinsic motivation are more narrowly defined depending on the degree to which they have been internalized. External regulation describes a motivation that is completely non-internalized. External regulation drives behavior intended to earn a reward or to avoid punishment or criticism. Introjected regulation refers to an extrinsic motivation that has been partially internalized and drives behavior because it creates internal pressure to engage in activities in order to preserve or enhance self-worth or to avoid guilt or shame. Identified regulation refers to behavior that is motivated by a desire to pursue an activity because it has personal meaning or will contribute to achieving one s goals. Identified regulation is highly internalized and drives autonomous behavior. Identified regulation differs from intrinsic motivation in that behavior motivated by identified regulation is driven by values and goals, while intrinsic motivation involves pursuing an activity because of the positive experience produced from the activity itself (Gagné et al., 2010). Researchers often group external regulation and introjected regulation together as non-self-determined or controlled motivation, as studies have shown them to be correlated and they are more external in nature. Intrinsic motivation and identified regulation are often grouped together as self-directed or autonomous motivation as they are also correlated and are more internal in nature. Research has shown that autonomous forms of motivation produce more positive behavioral, attitudinal, and emotional outcomes than controlled forms of motivation (Gagné et al., 2010). 37

62 Sharma & Irving (2004) propose a motivational theory that is similar to selfdetermined theory but is specifically oriented to a family business context. They define four primary motivations behind a family member s decision to join the family firm that influence their commitment to the family business: affective, normative, calculative, and imperative. Family members who join the family firm with an affective motivation want to (Sharma & Irving, 2004) join because they see working in the family business as a way to pursue their own life goals and career aspirations. Family members with an affective motivation see working in the family firm as an opportunity to create intentional change theory s ideal self (Boyatzis & McKee, 2005). Affective motivation is similar to self-determination theory s identified regulation. Family members who join the family business with a normative motivation join out of a sense of obligation (Sharma & Irving, 2004) a motivation fueled by their desire to satisfy their real or perceived expectations of senior generation family members. A normative motivation reflects the pursuit of intentional change theory s ought self, which blocks positive change and personal development (Boyatzis & McKee, 2005). Normative motivation is similar to self-determination theory s introjected regulation. Family members who join the family enterprise with a calculative commitment perceive that they have to (Sharma & Irving, 2004) join because of the opportunity costs of choosing another career choice. For example, they may feel that they must join to protect the value of their ownership stake. Calculative motivation is similar to selfdetermination theory s external regulation. Family members who join the family business with an imperative motivation feel the need to join (Sharma & Irving, 2004) because they doubt their own ability to 38

63 achieve career success outside of the family firm. Imperative motivation is similar to self-determination theory s amotivation. Sharma & Irving (2004) suggest that family members who join with normative, calculative, and/or imperative motivations put forth less discretionary effort than family members with affective motivations, and are thus less likely to be perceived as effective leaders or as engaged with their work as family members with affective motivations. This conclusion is consistent with self-determined theory s assertion that self-directed or autonomous motivation produces more positive outcomes than non-self-directed or controlled motivation. The premise of the study was that next-generation family business leaders with an autonomous motivation for working in the family firm would be more likely to be viewed as effective leaders and to be positively engaged with their work than those with a controlled motivation. Family Climate Family climate has a strong effect on family business culture and performance (Björnberg & Nicholson, 2007). Björnberg & Nicholson (2007) identified three broad categories that define family climate: (a) family intergenerational style, (b) family cohesion, and (c) family process. Family intergenerational style refers to the degree of authority exercised by the senior generation in a family and to how much time and attention the senior generation devotes to the younger generation. It involves parent and child behavior, which is critical to understanding parenting style (Darling & Steinberg, 1993) and its influence on the development of family leadership. In a family business context, it also refers to the intergenerational style of all senior family members who exercise authority in the family firm, which may include family members other than 39

64 parents. An intergenerational style that is over-controlling and oppressive may meet with resistance and rebellion from younger family members (Walsh, 2003), creating conflict that inhibits the next generation s ability to differentiate themselves and develop their own identities (Kerr, 1988) and leadership skills. On the other hand, an intergenerational style that involves paying adequate attention to the developmental needs of members of the younger generation can foster the acquisition of leadership skills and healthy family functioning (Björnberg & Nicholson, 2007). Family cohesion refers to both cognitive and emotional cohesion. Cognitive cohesion refers to the degree to which family members share worldviews, norms, and values. Cognitive cohesion influences the leadership culture of the family firm and can be used to create competitive advantage through what Habbershon and Williams (1999) identify as the familiness of a family enterprise. Emotional cohesion refers to the emotional bonds among family members. Emotional cohesion can contribute to positive family relationships, but too much emotional cohesion can become dysfunctional, leading to a family system that is rigid and enmeshed (Beavers & Voeller, 1983). A lack of sufficient cognitive or emotional cohesion can lead to destructive conflicts that put the functioning of the family and the family business at risk. Family process refers to the degree of open communication and adaptability in the family system. Open and healthy communication is viewed by family business researchers as one of the most central feature of well-functioning family and business systems (Gersick et al., 1997; Poza, 2013; Ward, 2004a). Adaptability is crucial to responding to changes in the external environment that are essential for family business survival (Walsh, 2003). Research on conflict style in family firms demonstrates the 40

65 importance of how families face challenges when working and living together, particularly when those challenges create strain on family relationships (Danes, Leichtentritt, Metz, & Huddleston-Casas, 2000). A family s conflict style is influenced by how its members communicate and its adaptability and receptivity to change (Björnberg & Nicholson, 2007). These three dimensions of family climate - intergenerational exercise of authority in the family system, family cohesion, and family process - interact to influence how well the family system functions and how conflict is managed. A study by Ensley and Pearson (2005) demonstrated that top management teams in family owned-firms with higher levels of relationship conflict had poor behavioral dynamics, including lower confidence in the team s abilities, less of a sense of belonging to the team, and a lower degree of consensus on the strategic direction of the firm. This research suggests that it is not only the next-generation family leaders who are affected by unhealthy family conflict, but the entire management team and organizational climate. In this study, it was expected that a family climate characterized by intergenerational attention, family cohesion, and open communication would positively affect the leadership effectiveness and work engagement of the next-generation leaders who participated, as well as the organizational climate of their family businesses. On the other hand, it was expected that intergenerational authority would negatively affect nextgeneration family leader effectiveness and work engagement and family business climate. Social Identification Theory and Bowen Family Systems Theory Social identification theory suggests that identification with some human aggregate, like a family, is closely associated with an individual s emotional 41

66 commitment to an organization (Adler & Adler, 1988; O'Reilly & Chatman, 1986; Riketta, 2005; Riketta & Dick, 2005), like a family business At the same time, Bowen s family systems theory emphasizes the need for each family member to achieve differentiation from the family unit in order to become a fully functioning adult and experience psychological health (Kerr, 1988), which can be viewed as reflective of emotional and social intelligence. A study by Björnberg and Nicholson (2012) found that growing up in a family business shaped one s definition of self. They concluded that the boundaries between self and the family business overlap for next-generation members of a business-owning family, thus creating a paradox for next-generation family leaders. The need to differentiate oneself from the family unit is quite similar to the concepts of self-awareness and self-management in emotional and social intelligence theory. The need to identify with the family system is related to the social awareness and relationship management competencies in emotional and social intelligence theory. It follows, then, that how a next-generation leader reconciles the tension between the need to differentiate himself or herself from and the need to identify with the family system is important to his/her development of emotional and social intelligence and leadership skills. Nowhere would this tension be more evident than for a next-generation family leader working in the family business. It is also reasonable to think that how well a nextgeneration family member negotiates this paradox is influenced by the relational climate of the family system to which they belong. Experiential Development Based on their landmark study of nearly 200 managers in large corporations, McCall, Lombardo, and Morrison (1988) found that the development of effective 42

67 leadership talent takes place over a long period of time, ten to twenty years (Kotter, 1982); and that while natural talent helps, the acquisition of leadership skills is more a result of the kinds of experiences leaders have and what they learn from those experiences. They discovered that challenging job assignments that stretch emerging leaders are the most effective teachers of leadership skills. The growing body of research on engagement with work also suggests that challenging work experiences are likely to have a positive effect on next-generation engagement with their work in the family firm. Dedication, one of Schaufeli and Bakker s (2003, 2004) three components of work engagement, is defined in part by a sense of challenge in one s work. Research has also shown that lack of challenging and meaningful work assignments can lead to job stress, which contributes to burnout, the polar opposite of work engagement (Coetzee & De Villiers, 2010). Kahn (1990) theorized that people experience challenging work as more meaningful, which in turn, increases their personal engagement with that work. May, Gilson, and Harter s (2004) empirical study on engagement of the human spirit at work provided support for Kahn s theory. Challenging work that encourages creative expression helps young adults who are in the exploration and establishment phase of their careers develop skills which may lead to greater career satisfaction and engagement (Coetzee & Bergh, 2009). Consequently, the degree to which next-generation leaders had experienced challenging work assignments was expected to positively affect their development of leadership skills and engagement with work. 43

68 Mentoring A mentoring relationship is intense, close, provides both professional and personal support in the interest of furthering the protégé s career (Carden, 1990; Sosik & Godshalk, 2000), and is more intimate and powerful than that of a typical supervisory relationship (Burke, McKeena, & McKeen, 1991). The literature is somewhat contradictory in its assessment of the value of mentoring in leadership development. McCall, Lombardo, and Morrison (1988) found that few experienced executives in their seminal study mentioned a mentoring relationship as a key factor in their most meaningful leadership development experiences. On the other hand, in his classic book The Seasons of a Man s Life, Levinson (1978) claims that intense mentoring relationships are important to adult development, but explains that such relationships rarely occur at work. Consequently, mentoring may be particularly important to the development of next-generation leaders in family firms as there is overlap between the family and business systems (Gersick et al., 1997), and mentoring relationships could develop in either or both of those systems. Furthermore, next-generation family leaders in family businesses are likely to have much longer tenures in the family firm than the executives in the McCall, Lombardo, and Morrison study (1988), who were primarily executives in non-family corporations who changed jobs often, thus providing a longer period of time for mentoring relationships to develop. Formal Leadership Training, Undergraduate and Graduate Classes Leadership training programs encompass a wide variety of formal internal and external leadership training programs and generally focus on one of three broad goals: (1) individual preparation and skill development, (2) the socialization of corporate 44

69 leadership values and vision, and (3) strategic intervention that promotes dialogue and effects change throughout an organization. Formal leadership training programs, including university-based programs, are rarely mentioned by managers and executives as critical to their development as leaders (Conger & Benjamin, 1999; Mccall et al., 1988). When executives do identify participation in formal training as a significant leadership development event, they most often mention coursework that they perceive to deal with an issue that is relevant to them at a particularly appropriate time in their career. In the studies conducted by McCall, Lombardo, and Morrison (1988), the programs mentioned were usually voluntary, attended later in the leader s career, focused on general management and business issues or process/self-analysis, and conducted away from the executive s place of work. The biggest payoff of these programs was an increased sense of confidence for the managers, rather than the actual content of the course itself. Researchers have also found that university graduate programs fail to adequately train students for the challenges of management and leadership (Mccall et al., 1988). In one study, 73% of MBAs reported that the skills they learned in their programs were used only marginally or not at all. Perhaps this is because university-based programs focus more on teaching technical skills than on developing leadership skills. There are exceptions, however. The Weatherhead School of Management at Case Western Reserve University created a program for MBA students using the principles of intentional change theory to help students develop emotional and social intelligence competencies, which as discussed above, are characteristics of effective leaders (Boyatzis & McKee, 2005; Boyatzis & Soler, 2012; Goleman et al., 2002). A longitudinal study that compared 45

70 students who participated in the course with those who did not found dramatic improvements in self-awareness and self-management skills, ranging from 47% for several cohorts of full-time MBA students to 67% for several groups of part-time MBA students. Improvements on social awareness and relationship management skills ranged from 40% for the part-time MBA students to 75% for the full-time MBA students (Boyatzis, 2008). A follow-up study with two groups of the part-time MBAs conducted two years after they graduated showed that the improvements lasted over time (Wheeler, 2008). Formal leadership training was not expected to have a significant effect on the leadership effectiveness of the next-generation leaders in this study. However, because the research indicates that formal leadership training increases leader self-confidence, which is linked to work engagement (Kram, 1988), it was anticipated that formal leadership training would have a positive effect on the degree to which the nextgeneration leaders in the study were engaged with their work in the family firm. Intentional Change Theory Intentional change theory explains the process of sustained desired change for individuals and groups (Boyatzis, 2008), so it is fundamental in thinking about how nextgeneration leaders learn leadership skills. Intentional change theory identifies five nonlinear and often discontinuous experiences or discoveries that emerge in the change process (Boyatzis, 2008). The first is envisioning a desired self, and describes the process of creating a dream for what one wants to become in the future (Boyatzis & Akrivou, 2006). The second discovery is the real self, which refers to the self others see. Discovering gaps between what one wants to become and how others perceive one to be 46

71 is a powerful motivator for change (Boyatzis, 2008). The third emergence in intentional change theory is developing a learning agenda to move from the real self to the ideal self (Boyatzis, 2008). Intentional change theory s fourth discovery is experimenting with new behaviors and then practicing them until they become second nature. Effort, persistence, and practice are critical in developing and exercising the emotional and social intelligence skills that are so highly predictive of leadership effectiveness (Boyatzis, 2008). Ericsson and Charness (1994) draw an interesting parallel between the development of effective leaders and the development of world-class adult violin performers, who honed their skills through many years of consistent training and practice that began early in life. Child prodigies who did not follow a disciplined practice regimen fell behind those who did, most of whom did not show as much promise as young children. Practicing often involves trying something new, failing, then trying again until success is achieved, so a safe environment in which to practice is needed (Kolb & Boyatzis, 1970). The fifth emergence in intentional change theory is forming trusting relationships with others who support the desired change effort by providing feedback, support, and permission for change. (Boyatzis, 2008). Leadership development is much more likely to occur in an environment that supports and rewards efforts to make changes and learn new leadership skills like emotional and social intelligence competencies (Cherniss & Adler, 2000). It is important to distinguish between relationships that help foster and sustain change and relationships that retard change, as existing reference groups sometimes desire that a person not change (Ballou, Bowers, Boyatzis, & Kolb, 1999). It follows from this fifth discovery of intentional change that the nature of the family 47

72 climate is likely to be critical to the development of next-generation family leaders. Supportive family relationships born of a positive family climate seem likely to facilitate the learning process while an overly controlling family climate seems likely to impede it. Because intentional change theory explains the process of learning leadership skills, it was another of the core theories that informed all phases of the study. Integration of Research Questions, Theory, and Research Design Table 3 summarizes the integration of the study s research questions, theoretical frameworks, and research designs for each of the study s three phases. The overarching theoretical framework for the entire study is based on the theories of emotional and social intelligence, intentional change, and family climate, and is discussed next. Table 3. Integration of Research Questions, Theory, and Mixed Methods Research Design Research Questions (1) What factors differentiate nextgeneration family business leaders perceived to be exceptional from those perceived to be below average? Phase 1 Theoretical Background Effective leadership theories Emotional and social intelligence Experiential development Mentoring and coaching Formal leadership training and undergraduate and graduate programs Research Design (Methods & Analysis) Qualitative study of 37 family and non-family business leaders in eleven privately-held, mid-market family firms; six nominated by experts as having exceptional leadership talent and five nominated as having below average leadership talent. Phenomenological, semi-structured interviews with senior family, nextgeneration family, and non-family executives in each firm. Open and axial coding, constant comparison, and thematic analysis to compare and contrast experiences of highly effective and less effective leaders. 48

73 Research Questions (2) What factors influence the leadership effectiveness of nextgeneration family business leaders and the degree to which they are positively engaged with their work in the family firm? (3) How are these factors related and what do those relationships suggest about how next-generation family leaders develop leadership skills and become engaged with their work in the family business? (4) How does the climate of the business-owning family affect the development of nextgeneration leadership talent and the degree to which next-generation family leaders are engaged with their work in the family firm? Intentional change theory Phase 2 Theoretical Background Effective leadership theories Work engagement Emotional and social intelligence Motivation for working in the family firm Responsibility and accountability Three-system model of family enterprise Family climate Intentional change theory and family business climate Research Design (Methods & Analysis) Quantitative study of 100 nextgeneration family leaders of privately-held family businesses and 350 members of their firms who served as their multi-raters on a 360- degree survey. Results of qualitative study and existing theory informed development of survey instrument, hypotheses, and conceptual structural equation model (SEM). Exploratory and confirmatory factor analyses in SPSS and AMOS to create measurement model using entire data set of 567 respondents. Next-generation leader responses matched with their multi-raters. Leaders with fewer than two multiraters excluded resulting in 100 matched data sets. Next-generation leader self-ratings of emotional and social intelligence behaviors removed from data set. Confirmation of measurement model in Smart PLS using matched data set. SEM analysis using Smart PLS to determine statistically significant direct, indirect, and mediated relationships among constructs, as well as total effects, R² values, Q² values, and f² effects. Results of SEM analysis used to evaluate hypotheses. 49

74 Research Questions (5) Does next-generation family leader selfperception of leadership behavior predict how others perceive their leadership effectiveness and/or how engaged they are with their work in the family business? Post-hoc analysis to further explore unexpected results. Phase 3 Part 1 Theoretical Research Design Background Effective leadership theories Work engagement Emotional and social intelligence (Methods & Analysis) Exploratory and confirmatory analyses in SPSS and AMOS to develop measurement model and next-generation leader selfassessment, multi-rater, and full sample latent constructs reflective of next-generation leader emotional and social intelligence using data collected in first quantitative phase. Leader selfawareness Family climate CB-SEM analysis in AMOS to determine effects of multi-rater and next-generation leader selfassessments of leadership behaviors, next-generation leader selfawareness, and family climate on next-generation leader effectiveness and work engagement. Independent samples t-test to compare how more and less effective next-generation leaders rated themselves on emotional and social intelligence relative to their multiraters. Research Questions (6) What experiences have the greatest impact on the development of leadership skills among next- Five post-hoc analyses using multigroup analysis in Smart PLS to further explore the effects of nextgeneration leader self-awareness on their leadership awareness and work engagement. Phase 3 Part 2 Theoretical Research Design Background Effective leadership theories (Methods & Analysis) Exploratory factor analysis of 20 next-generation leadership development experiences in SPSS to 50

75 generation family leaders of family businesses? Work engagement Experiential development Mentoring Formal leadership training and undergraduate and graduate programs create three leadership developments latent constructs. SEM analysis in Smart PLS to determine direct effects of leadership development experiences on nextgeneration leader effectiveness and work engagement and test hypotheses. Post-hoc analysis using simple linear regression to test for effects of leadership development experiences that did not load on one of the three constructs on next-generation leadership effectiveness and work engagement. Second post-hoc analysis in Smart PLS to further explore effects of leadership development constructs by integrating the SEM models developed for the first and second quantitative phases. Overarching Theoretical Framework Previous research has shown that emotional and social intelligence predicts leadership effectiveness and is correlated with work engagement. Intentional change theory explains how the process of learning leadership skills like emotional and social intelligence competencies actually works. Family climate has a strong effect on family business culture and performance. That much is known. What we don t know is how the climate in a business-owning family affects the development of next-generation leader emotional and social intelligence competencies. Family climate theory suggests that the nature of family relationships is likely to facilitate or impede that process. It is as if there are unseen, or at least unacknowledged, family forces in the background acting on a next- 51

76 generation leader s ability to move through the steps of intentional change by developing a vision of an ideal self that includes serving as a leader in the family firm, discovering gaps between that vision and their current leadership results through accurate selfawareness, creating a leadership development plan to close the gaps, feeling safe to experiment with and practice new leadership behaviors, and feeling supported by family members in making those changes. While the nature of family relationships in one s family of origin plays an important role in the development of the personality traits and leadership skills of any leader, the influence of family dynamics continues to exert an influence on next-generation family business leaders throughout their careers. A major goal of this study was to more clearly understand the influence of family climate by identifying factors that can be observed as manifestations of the underlying process of next-generation family leader development. Figure 3 depicts the study s first theoretical premise that family climate affects next-generation leader display of emotional and social intelligence, which in turn, predicts their leadership effectiveness and work engagement. Those effects are indicated by the solid black arrows. The study s second theoretical premise was that family climate also influences the intentional change process through which next-generation leaders acquire emotional and social intelligence skills. That influence is indicated by the dashed arrows. While the effect of family climate was specifically addressed in the study s fourth research question, the exploration began with the idea that family climate might play a role in answering all six research questions. 52

77 Figure 3. Next-Generation Family Business Leader Development Theoretical Framework Mixed-Methods Research Design Table 3 above maps the research questions addressed in each phase of the study to the specific methods used to explore them. Justification for the use of a mixed-methods approach and brief summaries of the methods employed for each of the three phases follow. See Figure 4 for a flow chart of procedures and key points of integration. Detailed descriptions of methods and analyses utilized in each of the three phases are provided in the full reports on each study in Chapters 2, 3, and 4. 53

78 Figure 4. Study Diagram and Integration of Mixed Methods 54

79 Exploratory Sequential Study Design A QUAL QUAN quan mixed-methods approach with an exploratory sequential design (Creswell & Plano Clark, 2011) was employed, as it was perfectly suited to address the research questions and goals of the study. Taken together, the research questions were both exploratory and confirmatory in nature. One of the primary advantages of a mixed methods approach is that it facilitates addressing both kinds of questions in the same study (Teddlie & Tashakkori, 2009). The mixed methods design allowed examination of the research questions in greater breadth and depth than would have been possible using any single method as it facilitated both discovery and explanation. The first qualitative phase used an extreme case comparison method to tease out differences in the leadership behaviors of leaders in family firms nominated by family business experts as having done an exceptional job of developing next-generation leadership talent from those that had done a below-average job. The findings from this first phase informed the development of the second and third quantitative phases, including a narrowing of the unit of analysis from all leaders in family firms to nextgeneration family member leaders exclusively, since it was in this group that the greatest differences in leadership behaviors were identified. The quantitative phases used factor analysis, structural equation modeling, and simple linear regression techniques to identify relationships and test the strength and generalizability of the factors identified as important to the development of next generation family leaders in the first qualitative phase. Results were triangulated in the interpretation phase providing stronger support for the study s conclusions and development of theory than would have been possible in a 55

80 single-methods study. Not only did the qualitative study provide the grist for the development of the quantitative phases, but it also suggested rich explanations for the relationships discovered in those studies. Phase 1 Qualitative Study An exploratory qualitative approach was employed in the first phase of the study to answer the first research question. The leadership behaviors of leaders in family firms nominated by family business experts as having done an exceptional job of developing next-generation leadership talent was compared and contrasted with the leadership behaviors of leaders from firms that were nominated as having done a below-average job in order to identify differentiating factors. The research sample consisted of 37 leaders of eleven family-owned firms. Family businesses selected for the study were nominated by family business consultants, advisors, academics, and other members of the interviewer s personal network. In most firms, the active family CEO, a next-generation family member involved in the management of the business, and a senior non-family executive were interviewed in order to explore different perspectives on leadership development in the companies. It turned out that this variety in the sample revealed some of the more significant findings. The qualitative study was conducted following a grounded theory approach as recommended by Strauss and Corbin (1998) because it provides a well-established means of systematically collecting and analyzing data collected in the field to understand complex psychological and sociological phenomena like leadership development in a family business. Conger (1998) specifically recommends qualitative research rooted in grounded theory as the method of choice for topics as contextually rich as leadership. 56

81 While a review of the literature on leadership and family business informed the exploration, a grounded theory approach allowed openness to new discoveries informed by the lived experiences of the participants in the study. Phase 2 Quantitative Study The second phase of the research was a quantitative study informed by the results of the initial qualitative study, and employed a multi-rater cross-sectional design and structural equation modeling techniques. Data was collected over a four-month period from mid-september 2013 to mid- January Participants were recruited through the researcher s personal network of privately-owned family business owners and consultants, university-based family business centers, business trade organizations with privately-owned family business members, and businesses which provide services to family firms. The total sample included responses from 567 members of privately-owned family firms ranging in size from under $25 million in revenue to over $500 million. The full sample was comprised of 185 next-generation family leaders and 382 multi-raters, and was used to create the measurement model for the study. Only next-generation leaders for whom data was received from at least two multi-raters were retained for use in the analysis of the structural equation model, resulting in a matched sample of 100 nextgeneration leaders and 350 multi-raters. The three questions (questions 2, 3, and 4) addressed in the second phase were both confirmatory and exploratory in nature (see Table 3). The goals of the second phase were to further explore and expand on the results of the qualitative study, including discovery of possible relationships among the variables identified as important to the development of next-generation family firm leaders. Hypotheses based on theory and the 57

82 qualitative results were developed and testing using structural equation modeling techniques. The effects of family climate were of particular interest as the literature, the results of the qualitative phase, and the primary researcher s experience suggested that family relationships are important to next-generation leader development. Exploring the family effect using rigorous quantitative methods represented an opportunity to make a meaningful contribution to family business theory and practice. Phase 3 Quantitative Study A second quantitative study was conducted in the third phase to analyze the data collected during the first quantitative study that was unique to the next-generation family leaders. This phase of the research was designed to answer two questions, one that was primarily confirmatory in nature (question 5) and was addressed in Part 1 of the third phase, and one that was primarily exploratory (question 6) that was addressed in Part 2. As prior leadership research indicates that leaders often perceive their leadership behaviors differently than those with whom they work (Atwater & Yammarino, 1992; Fleenor et al., 1997; Mabe & West, 1982; Podsakoff & Organ, 1986; Taylor, 2014; Tsui & Ohlott, 1988; Van Velsor, Taylor, & Leslie, 1993; Wolff, 2005), the goal of Part 1was to determine if this held true for next-generation family business leaders, and if so, how any gaps in self-awareness influenced others perceptions of their leadership effectiveness. A quantitative approach allowed the detection of statistically significant differences in observer and self-ratings of next-generation leader behaviors and the creation of a variable to represent those differences in a structural equation model. It also allowed the development of a separate latent construct reflective of next-generation leader self-perceptions of leadership behaviors to determine the effect of self-awareness 58

83 on leadership effectiveness and engagement with work, as well as to explore its relationships with the constructs created for the structural equation model used in the study s first quantitative phase. The study s sixth question was addressed in Part 2 of the third phase and explored the impact of 20 different leadership development experiences suggested by the literature and the results of the qualitative study as potentially important to the development of next-generation leadership skills. Exploratory and confirmatory factor analyses resulted in development of three latent constructs reflective of challenging work experiences, mentoring, and formal training. Structural equation modeling techniques were used to test hypotheses about the effects of those types of experiences on next-generation leadership effectiveness and work engagement. Simple linear regression was used to test the effects of developmental experiences that did not load on one of the three latent factors to provide a more complete analysis. A post-hoc analysis of the impact of leadership development experiences represented another point of integration in the study. The constructs developed in the third phase were added to the structural equation model developed in the second phase to explore the mechanisms through which the developmental experiences influenced leadership effectiveness and work engagement. This analysis produced some of the study s more interesting findings. Integration of the Three Phases The quantitative methods employed in the second and third phases were well suited to the study s research goals, and the results were complementary to those of the qualitative phase. Quantitative analysis facilitated testing hypotheses developed from the 59

84 results of the qualitative study and literature review, and demonstrated the internal and external validity of inferences suggested by the findings (Teddlie & Tashakkori, 2009). Internal validity refers to the validity of inferences about whether the relationships between two variable is causal (Shadish, Cook, & Campbell, 2002). External validity refers to the generalizability of the findings (Teddlie & Tashakkori, 2009). A claim of generalizability could not be supported by qualitative research alone. Results of all three studies were triangulated in the interpretation phase and are reported in Chapter 5. Remaining Chapters Chapters 2 4, each of which is a complete research paper on one of the three phases of the study, follow. Chapter 2 provides a complete description and results of the qualitative phase, which identified four factors that promote and four factors that impede the development of leadership talent in family enterprises. Chapter 3 is the full report on the first quantitative phase, which found that family climate and the degree to which next-generation leaders accept personal responsibility have significant effects on the development of their leadership talent and engagement with work. Chapter 4 is the full report on the second quantitative phase, which found that that next-generation leaders who are provided with challenging work assignments, meaningful mentoring relationships, the right kind of formal training, and opportunities to receive candid feedback on their leadership behaviors are more likely to become self-aware, effective leaders who derive positive energy, inspiration, and fulfillment form their work in the family firm. Research questions addressed and results from each phase of the study are summarized in Table 4. Chapter 5 summarizes and integrates the findings of all three phases and interprets results. Chapter 6 provides top-line conclusions and includes study 60

85 limitations, contributions to theory, implications for practice, suggested future research, and some closing thoughts. Research Question Finding 1 Finding 2 Finding 3 Finding 4 Finding 5 Finding 6 Table 4. Summary of Study Findings Phase 1 Developing Leadership Talent in Family Businesses: Embracing Risk or Playing It Safe (1) What factors differentiate next-generation family business leaders perceived to be exceptional from those perceived to be below average? Exceptional Next-Generation Leaders Early leadership experiences in high school and college begin to shape the leadership values and practices of leaders in family firms with exceptional leadership talent and establish being a leader as part of their selfidentities. Family business leaders in firms with exceptional leadership talent have typically held a series of jobs with increasing levels of authentic responsibility and accountability. Leaders in family businesses with exceptional leadership talent demonstrate emotional and social intelligence, while there is a remarkable absence of these skills among the family leaders in the firms with belowaverage leadership talent. Personal reflection plays a meaningful role in the ability of family business leaders in firms with exceptional leadership talent to learn leadership lessons from their experiences. Below-Average Next-Generation Leaders Being shielded from the risk and consequences of failure denies nextgeneration family business leaders valuable opportunities to develop their leadership talent. Family business leaders who join their family firms out of a sense of obligation or entitlement fail to develop their leadership skills to the same extent as those who join because the family firm represents an opportunity for expression of their own passion and sense of purpose. Family business environments characterized by unresolved family Finding 7 conflict impede the development of next-generation leadership talent. Family firms that promote next-generation family members to leadership Finding 8 positions for which they are not qualified impede the development of their leadership talent. Phase 2 Developing Next-Generation Leadership Talent in Family Businesses: Family Climate Matters (2) What factors influence the leadership effectiveness of next-generation Research family business leaders and the degree to which they are positively Questions engaged with their work in the family firm? 61

86 (3) How are these factors related and what do those relationships suggest about how next-generation family leaders develop leadership skills and become engaged with their work in the family business? (4) How does the climate of the business-owning family affect the development of next-generation leadership talent and the degree to which next-generation family leaders are engaged with their work in the family firm? The emotional and social intelligence competencies of next-generation Finding 1 family firm leaders are the major drivers of their leadership effectiveness. Family climate affects the degree to which next-generation family leaders accept personal responsibility for their actions and decisions, which in Finding 2 turn predicts their emotional and social intelligence and leadership effectiveness. Family climate predicts the degree to which next-generation leaders in the Finding 3 family business are held accountable by others, which in turn affects how positively engaged they are with their work. Family climate influences the motivations of next-generation leaders for Finding 4 working in the family business, which affects their leadership effectiveness and the climate of the family business itself. Phase 3: Part 1 Developing Next-Generation Leadership Talent in Family Businesses: The Effects of Self-Awareness and Leadership Development Experiences (5) Does next-generation family leader self-perception of leadership Research behavior predict how others perceive their leadership effectiveness and/or Question how engaged they are with their work in the family business? Observer assessments of next-generation family leader behaviors reflective of emotional and social intelligence competencies are much Finding 1 stronger predictors of their leadership effectiveness than next-generation leader self-assessments. Next-generation family leader lack of self-awareness limits their Finding 2 leadership effectiveness. Next-generation family leader engagement with work in the family firm is positively affected by self-perceptions of leadership behaviors reflective Finding 3 of emotional and social intelligence competencies and negatively affected by lack of self-awareness. Open communication in the business-owning family helps nextgeneration family leaders become more self-aware, develop emotional Finding 4 and social intelligence competencies, improve their leadership effectiveness, and become more positively engaged with their work in the family firm. Phase 3: Part 2 Developing Next-Generation Leadership Talent in Family Businesses: The Effects of Self-Awareness and Leadership Development Experiences 62

87 Research Question Finding 5 Finding 6 Finding 7 Finding 8 Finding 9 (6) What experiences have the greatest impact on the development of leadership skills among next-generation family leaders of family businesses? Challenging work experiences help next-generation family leaders develop leadership skills and positively engage with their work in the family firm. Mentoring encourages next-generation family leaders to take on and learn from challenging work experiences, which in turn improves their leadership effectiveness and increases their engagement with work in the family firm. Mentoring increases next-generation family leader motivation, which in turn improves their leadership effectiveness and increases their engagement with work in the family firm. Formal training encourages next-generation family leaders to take on and learn from challenging work experiences. Next-generation leader perceptions of the impact of some leadership development experiences do not predict how they actually affect their leadership effectiveness or engagement with work. 63

88 CHAPTER II: DEVELOPING LEADERSHIP TALENT IN FAMILY BUSINESSES: EMBRACING RISK OR PLAYING IT SAFE Introduction Family businesses constitute 80 98% of all businesses in the world s free economies, generate 49% of the GDP in the U.S. and more than 75% in most other countries, employ 80% of the U.S. workforce and more than 75% of the working population globally, and account for about 86% of all new jobs created over the last decade in the U.S. (Poza, 2010). Despite their importance, only 30% of family businesses survive from the first to the second generation of family ownership, only 12% survive from the second generation to the third, and only 4% survive from the third generation to the fourth (Poza, 2010). Succession is often cited in the literature as the most critical factor related to the failure of family firms to survive through multiple generations of family ownership (Sharma et al., 2004). The issue of succession is even getting attention in the popular press. The Montreal Gazette recently published an eightweek series on succession in family businesses in which Bakr Ibrahim, professor of management at Concordia University s John Molson School of Business says, Most family businesses will collapse by the third generation of ownership, mainly because of the succession problem (Montreal Gazette, 09/05/2011). Succession planning, which includes the development of leadership talent, is critical to family business continuity (Lee, Lim, & Lim, 2003); yet planning for succession is often ignored or put off by family firms (Lansberg, 1988; Rosenblatt, De Mik, Anderson, & Johnson, 1985). Fiegener et al. (1994) point out that very few studies have explored how future leaders are developed in family firms. 64

89 While family business research is still an emerging field of academic study, a recent survey of family business researchers found that most think succession is one of the areas in which the most progress has been made(litz, Pearson, & Litchfield, 2012). However, much of the research on family business succession focuses on the process for selecting the successor CEO (Sharma et al., 2004), the exit style of the incumbent CEO and how that style affects the way in which the succession drama plays out (Sonnenfeld & Spence, 2005), characteristics of successors (Sharma et al., 2004) and successor motivations (Sharma & Irving, 2004). Sharma et al. (2003) suggest further research to determine how various dimensions of succession planning, including training the successor, impact satisfaction with the succession process. In his classic work, Family Wealth: Keeping It in the Family, James Hughes argues that the most effective way for business-owning families to preserve and grow their wealth is to develop their human and intellectual capital (Hughes Jr & Hughes, 2004). Unfortunately, most families get that backwards with a focus on ownership structure, estate tax, and investment policies dominating their thinking about succession planning (Morris et al., 1997). This is important because family business transitions occur more smoothly when heirs are better prepared for leadership responsibilities (Morris et al., 1997) In a survey of family business owners, Ward (1997) found that weak next-generation leadership was perceived as one of the top three threats to long-term family firm success. Some research has been done on leadership development in large public corporations (Conger & Benjamin, 1999; McCall Jr et al., 1988), but there is very little in the literature on how leadership talent is developed in family-owned enterprises. 65

90 To address that gap, we designed a qualitative study in which we interviewed 37 leaders in 11 mid-market privately owned family businesses to learn what experiences had most influenced their development as leaders. Our study compared and contrasted family firms nominated by family business experts as having exceptional leadership talent with those nominated as having below-average leadership talent. The results of our research revealed meaningful differences in the two groups and deepened our understanding of our research question: What factors influence the development of leadership talent in family businesses? The paper is organized as follows. First, a brief review of the literature on leadership development is presented along with an initial theoretical framework that informed the study. This is followed by a description of the research methodology employed, key findings, and a discussion which suggests a conceptual framework for leadership development in family firms based on the findings. The paper concludes with implications for practice and suggestions for future research. Literature Review and Theoretical Framework Management research continues to explore how leadership talent is developed. Are effective leaders born with innate leadership abilities or are they made as they learn leadership competencies over time (Dreyfus, 2008)? The literature suggests that many factors are involved in the creation of a leader (Conger, 1998), including genetic traits, early family environment, life and work experiences, and formal and informal training (Conger & Benjamin, 1999). Based on a review of leadership literature, we developed a preliminary theoretical framework that reflected our thinking that the emotional and social intelligence competencies of leaders in the firm, job assignments 66

91 and promotions, the presence of mentors or coaches, participation in formal leadership training or graduate programs, and the relational climate of the family enterprise may be particularly important in the development of leadership talent in family businesses. Emotional and Social Intelligence How intelligently leaders identify, understand, and manage their own emotions, and the emotions of those with whom they interact, determines the effectiveness of their leadership behavior and the quality of the relationships they create (Goleman et al., 2002). While technical skills are important to job performance at all levels, when it comes to leadership, research has demonstrated that 90% of a leader s effectiveness is determined by emotional and social intelligence (ESI) (Cherniss & Adler, 2000). Emotional and Social Intelligence Theory identifies four domains of ESI: selfawareness, self-management, social awareness, and relationship management (Goleman et al., 2002) and 19 specific competencies associated with the expression of ESI (see Appendix A). While it is often assumed that soft-skills like ESI competencies are innate or fixed in early childhood, they can in fact be learned (Cherniss & Adler, 2000; Goleman et al., 2002). Reading, lectures, or seminars can help leaders understand ESI concepts, but actually learning ESI skills requires impactful experiential learning (Boyatzis & McKee, 2005; Cherniss & Adler, 2000; Goleman et al., 2002). A boss who models effective ESI skills reinforces the same behavior in his/her subordinates and helps them learn and practice ESI skills (Manz & Sims, 1986; Weiss, 1977). Very little research has been focused on the role emotional intelligence plays or on how emotional intelligence skills are learned in family businesses (Boyatzis & Soler, 2012). This is important because the social and cultural context influences how ESI 67

92 skills are learned and transferred from one situation to another (Cherniss & Adler, 2000) and the emotional connections among family members in a family business environment are particularly intense (Tagiuri & Davis, 1996). Our study represents an opportunity to make a contribution to our understanding of ESI by examining the impact of ESI within a family business context. Experiential Development Based on their study of nearly 200 managers in large corporations, McCall, Lombardo, and Morrison (1988) developed the thesis that the development of effective leadership talent takes place over a long period of time, ten to twenty years (Kotter, 1982), and that it is not simply a function of raw talent, but also a function of the experiences leaders have and what they do with those experiences. They identified seven types of job assignments as those that had the greatest effect on the development of the managers in their study: (1) early work experience, (2) first supervisory job, (3) project/task force assignments, (4) line-to-staff switches, (5) starting something from scratch, (6) fix-it turnaround jobs, and (7) leaps in scope (McCall Jr et al., 1988). When executives in the McCall et al. (1988) study reflected on their experiences, they identified five categories of lessons learned: (1) setting and implementing agendas, (2) handling relationships, (3) adopting basic values and guiding principles, (4) developing an executive temperament, and (5) achieving personal awareness (Lindsey & Homes, 1987). This ability to reflect and extract lessons learned from experiences turns out to be one of the most salient characteristics of effective executives, who actually seek out experiences that are rich in opportunities for learning (McCall Jr et al., 1988). Our study of multi-generational family businesses provides a unique opportunity to examine 68

93 how a lifetime of experiences, from early childhood through late adulthood impacts a family business leader s development. Mentoring and Coaching A mentoring relationship is intense, close, provides both professional and personal support in the interest of furthering the protégé s career (Carden, 1990; Sosik & Godshalk, 2000), and is more intimate and powerful than that of a typical supervisory relationship (Ronald, Catherine, & Carol, 1991). Three specific functions of mentoring have been identified in the literature: (1) a vocational or career function, in which the mentor uses his organizational power and influence to advance the protégé s career (Kram, 1988), (2) a psychosocial function, in which the mentor provides emotional support, counseling, acceptance, and guidance directed towards the protégé s personal growth (Kram, 1988), and (3) a role-modeling function (Scandura, 2006) in which a protégé emulates the behavior of a trusted and respected mentor (Gibson & Cordova, 1999). The literature is contradictory in its assessment of the value of mentoring in leadership development. McCall et al. (1988) found that few experienced executives in their seminal study mentioned a mentoring relationship as a key factor in their most meaningful leadership development experiences. Executives in that study indicated that having a variety of bosses with different styles of leadership was more impactful. Our preliminary conceptual framework included mentoring as possibly important in the development of family business leaders as there is overlap between family and business systems (Gersick et al., 1997), and mentoring relationships could develop in either or both of those systems. 69

94 In conducting our interviews, we were also alert to evidence of formal coaching as it is mentioned frequently in the literature as a valuable leadership development experience and a catalyst for making consistent change (Edelstein & Armstrong, 1993). Formal coaching is different from mentoring in that it is usually shorter in duration (typically 6-18 months) and is a formal contracted relationship (Feldman & Lankau, 2005). Leadership Training and Graduate Programs Formal internal, commercial, and university-based leadership training programs encompass a wide variety methodologies including case studies, lectures, discussion groups, observed exercises, 360 surveys; simulations, and outdoor adventure or indoor psychological exercises (Conger & Benjamin, 1999). These programs generally focus on one of three broad goals: (1) individual preparation and skill development, (2) the socialization of corporate leadership values and vision, and (3) strategic intervention that promotes dialogue and effects change throughout an organization (Conger & Benjamin, 1999). Surprisingly, formal leadership training programs are rarely mentioned by managers as critical to their development as leaders (Conger & Benjamin, 1999; McCall Jr et al., 1988). Training programs are not without value, however. In one study, managers indicated that classroom education was of value in helping them to articulate a tangible vision, values, and strategy for their organizations (Ready, 1994a). Perhaps an overlooked value of formal classroom training is the role it can play when viewed as part of a broader development program that includes experiential development. One study concluded that training programs can serve as turning points in helping leaders move 70

95 beyond merely possessing a leadership competency to actually using it effectively and regularly (Dreyfus, 2008). Ward (1997) found that most next-generation family business successors are educated about business leadership through unsupervised on-the-job training or formal coursework at a college or university, but that those experiences do an inadequate job of preparing them to meet the unique challenges they will face as family business leaders. He suggests quality mentoring relationships; work experience outside the family business; and work with trade associations, civic groups, and charitable not-for-profits as ways to help next-generation family leaders learn how to deal with expectations in the world outside the family business (Ward, 1997). Nonetheless, we included formal training in our initial theoretical framework because there has been a dramatic increase in the number of formal education programs centered on family businesses issues over the past 20 years. Intentional Change Theory and Relational Climate Intentional Change Theory (ICT) explains the process of sustained desired change for individuals and groups (Boyatzis, 2008). ICT is critical to our study because leadership development is fundamentally sustainable change in the leadership behavior of individuals within an organization and in the leadership culture of the organization itself. ICT identifies five non-linear and often discontinuous experiences or discoveries that emerge in the change process (Boyatzis, 2008). The first is envisioning a desired self, and describes the process of creating a dream for what one wants to become in the future. (Boyatzis & Akrivou, 2006). The second discovery of ICT is the real self, which refers to the self others see. Discovering gaps between what 71

96 one wants to become and how others perceive one to be is a powerful motivator for change (Boyatzis, 2008). The third emergence in ICT is developing a learning agenda to move from the real self to the ideal self (Boyatzis, 2008). ICT s fourth discovery is experimenting with new behaviors and then practicing them until they become second nature. Effort, persistence, and practice are critical in developing and exercising leadership skills (Boyatzis, 2008). Ericsson & Charness (1994) draw an interesting parallel between the development of effective leaders and the development of world-class adult violin performers, who honed their skills through many years of consistent training and practice that began early in life. Child prodigies who did not follow a disciplined practice regimen fell behind those who did, most of whom did not show as much promise as young children. Practicing often involves trying something new, failing, then trying again until success is achieved, so a safe environment in which to practice is needed (Kolb & Boyatzis, 1970). The fifth emergence in ICT is forming trusting relationships with others who support the desired change effort by providing feedback, support, and permission for change. (Boyatzis, 2008). Leadership development is much more likely to occur in an organization that supports and rewards efforts to make changes and learn new leadership skills (Cherniss & Adler, 2000). It is important to distinguish between relationships that help foster and sustain change and relationships that retard change, as existing reference groups sometimes desire that a person not change (Ballou et al., 1999). We anticipated that in family businesses the second, fourth, and fifth discoveries of ICT would be particularly important. We wondered if family owner/leaders receive accurate feedback on their leadership performance allowing them to form realistic 72

97 definitions of their real selves. We also conjectured that family relationships might have a strong influence on the extent to which next-generation family leaders would feel encouraged and supported in their efforts to experiment with new leadership behaviors. Leadership Talent Leadership has been broadly defined in two ways. The first refers to individuals who hold formal managerial positions. Such leaders may have attained their positions through hard work, intelligence, ambition, political skill, family membership, and/or luck, but they may or may not possess effective leadership skills (Hogan & Kaiser, 2005). True leadership talent involves the ability to persuade followers to suspend their purely selfish interests to support and work towards a common good (Hogan & Kaiser, 2005). Bell (1973) refers to this description of leadership talent as the ability to create commitment in others. Boyatzis and McKee (2005) refer to leaders with true leadership talent as resonant leaders, those who have demonstrated that they are able to blend financial, human, intellectual, environmental, and social capital to create positive results and competitive advantage for their organizations (Boyatzis & McKee, 2005). Leadership talent is critical to our evolution as social beings as it is necessary for group survival (Hogan & Kaiser, 2005), which we extend to the sustainability of family firms in our theoretical framework. Effective Family Business Leadership Does leadership talent matter? The literature clearly demonstrates that effective leadership is central to the success of any business, family-controlled or not. In his study of the highly successful turnaround companies featured in Good to Great, Collins (2001) discovered that those companies selected a new CEO first, then adopted a winning 73

98 strategy developed and executed by that CEO and his/her team, rather than the other way around. Collins refers to these highly effective leaders as Level 5 leaders, who in addition to exhibiting the resonant leadership characteristics identified by Boyatzis and McKee (2005), were modest, humble, and phenomenally persistent (Hogan & Kaiser, 2005). Based on a study of 160 companies and 200 management practices, Joyce, Nohira, and Roberson (2003) estimated that CEOs account for about 14% of the variance in firm performance. Another study conducted by Peterson, Smith, Martorana, and Owens (2003) demonstrated that in 17 very large corporations, CEO personality had a powerful influence on the culture and dynamics of the senior leadership team; which were strongly correlated with income and sales growth, return on investment, and return on assets. Noted family business expert, John Ward (1997) emphasizes how important effective leadership is to the sustainable growth of a family enterprise, which often determines a family firm s ability to survive through multiple generations of family ownership. Methods Methodology Our research methodology followed a grounded theory approach as described by Strauss and Corbin (1998), because it provides a well-established means of systematically collecting and analyzing data collected in the field to understand complex psychological and sociological phenomena like leadership development in a family business. Conger 74

99 (1998) recommends qualitative research, rooted in grounded theory, as the method of choice for topics as contextually rich as leadership. We conducted 37 phenomenological, semi-structured interviews with senior, next-generation, and non-family family business leaders to explore the experiences that have had the greatest impact on their development as leaders. This interview method provided structure and uniformity in the collection of data, but also allowed flexibility and openness to the emergence of novel contributions from respondents. Sample The research sample consists of 37 leaders (units of coding) of family businesses from eleven family-owned firms (units of analysis). Family businesses selected for the study were nominated by family business consultants, advisors, academics, and other members of the interviewer s personal network. Consistent with thematic analysis (Boyatzis, 1998), the sample was divided into two sub-samples; six family firms nominated as having exceptional leadership talent and five nominated as having belowaverage leadership talent. Each firm received two or more nominations for their respective categories. In most firms, we interviewed the active family CEO, a next-generation family member involved in the management of the business, and a senior non-family executive, in order to explore different perspectives on leadership development in the companies. In some instances, we interviewed family business leaders who did not fit neatly into our family CEO, next-generation leader, non-family executive model (see Table 5). It turned out that this variety in the samples revealed some of the more illuminating findings. 75

100 Participants in the study ranged from 26 to 85 years of age and represented five different generations of family ownership in their family firms. Eight of the participants were senior generation family leaders, 15 were next-generation family leaders, and 14 were non-family leaders. Six of the participants were female and the rest were male (see Table 5). Table 5. Sample Characteristics Exceptional Leadership Talent Firms Below-Average Leadership Talent Firms Leadership Leadership No. Position Generation Age Sex No. Position Generation Age Sex 1 NFL N/A 49 F 21 NGFL G2 50 M 2 NGFL G3 51 M 22 SGFL G1 74 M 3 SGFL G2 78 M 23 NFL N/A 54 M 4 NFL N/A 50 M 24 NFL N/A 33 M 5 NGFL G5 39 M 25 NGFL G3 44 F 6 NFL N/A 54 F 26 SGFL G2 68 M 7 NFL N/A 57 M 27 NFL N/A 52 M 8 NGFL G4 51 M 28 SGFL G2 41 M 9 NGFL G4 43 M 29 NGFL G3 26 M 10 NGFL G4 35 M 30 NGFL G3 44 F 11 NFL N/A 55 F 31 NFL N/A 70 M 12 NFL N/A M 32 NGFL G3 48 M 13 NGFL G5 36 M 33 NGFL G3 46 M 14 SGFL G4 66 M 34 SGFL G3 85 M 15 SGFL G1 62 M 35 SGFL G3 73 M 16 NGFL G2 33 M 36 NFL N/A 56 M 17 NFL N/A 54 M 37 NFL N/A 62 M 18 NGFL G4 41 F 19 SGFL G3 61 M 20 NFL N/A 55 M Code: SGFL = Senior Generation Family Leader NGFL = Next-generation Family Leader NFL = Non-Family Leader Family businesses included in the study are all mid-market firms with annual revenues between $100 million and $500 million. Nine are privately owned by family members who share common ancestry, one is owned by members of three different families, and one is owned by a larger company that is majority-owned and controlled by 76

101 one family. Family businesses included in the study are located in the eastern, midwestern, and southwestern United States, and Canada; and represent a wide range of industries including construction materials, publishing, broadcasting, farm and garden equipment retailing, chemicals, environmental services, energy, highway construction, engineering, general construction, precision manufacturing, agriculture, and food processing. Data Collection Interviews were conducted between March and August 2012, and were minutes in length. Consistent with a semi-structured approach (Strauss & Corbin, 1998), interviews were guided by an interview protocol (Appendix B), but respondents were allowed to tell their stories in their own ways. The interviews were conducted face-toface or by telephone, and were recorded and later transcribed for analysis. Participants were advised of the precautions taken to protect their privacy and signed a form or gave verbal approval agreeing to participate in the interview and consenting to audio recording. The respondents were remarkably open and talked freely about their own strengths and weaknesses as leaders, leadership development experiences, family relationships, business strategy, ownership structure, governance, and their hopes and dreams for the future. Most respondents commented that they enjoyed the interview experience and many said that it stimulated reflection that helped them think of important factors in their development as leaders that they had not thought of before. As one respondent commented, As I'm sure you've probably heard, one of the things that is helpful, getting asked the type questions that you're asking, is that it does help create 77

102 some clarity in the head of the person who's being interviewed. So I appreciate that opportunity to have to form those thoughts to be able to understand them more deeply. Data Analysis Our data was interpreted using analytical methods recommended by Strauss and Corbin (1998), Boyatzis (1998), Charmaz (2006), and Saldaña (2009), and included open and axial coding, constant comparison, and thematic analysis. Emerging themes and concepts were identified until theoretical saturation was reached (Strauss & Corbin, 1998). As recommended by Charmaz (2006) and Saldaña (2009), analytic memos were generated throughout the data coding process to document and reflect on the coding process itself, the influence of experiences recounted by the respondents on their leadership development, guide additional literature review, refine the interview protocol, and to note insights that could lead to the development of theory. Following a thematic analysis approach recommended by Boyatzis (1998), data analysis began by selecting ten interviews that were representative of the entire sample, five from the exceptional leadership sub-sample and five from the below-average leadership sub-sample. The researcher read through the transcripts of each of these ten interviews multiple times and conducted open coding (Strauss & Corbin, 1998), a rigorous process of examining each line, sentence, and paragraph of data to identify codable moments, fragments of text with potential meaning (Boyatzis, 1998). The codable moments in each transcript were then sorted and categorized with similar text from other transcripts to form descriptive categories. A second phase of coding, axial coding, (Strauss & Corbin, 1998) was conducted to refine and re-categorize the data as defining themes and concepts emerged. A third phase of analysis compared themes 78

103 identified in the two sub-samples (exceptional and below-average leadership talent) to tease out meaningful differences in the experiences of the leaders interviewed (Boyatzis, 1998). Throughout the process, we progressively refined themes, moving back and forth between the data in the two sub-samples and the literature. This rigorous iterative process of coding, comparing, and interpreting is designed to yield insights that might not be possible to capture using other research methods (Boyatzis, 1998). The process yielded 1,596 codable moments, 119 categories, and 19 themes. The ten interviews were then coded by an independent reviewer to establish interrater reliability. Percentage agreement on presence of themes (Boyatzis, 1998) ranging from 80% to 100 % was established for 14 themes (see Appendix C). The five themes that did not achieve at least an 80% interrater reliability score were eliminated from further consideration (Boyatzis, 1998). We then prepared a codebook which defined the remaining 14 themes and used it to code the other 27 interviews, looking for the presence of these themes and staying open to the possible emergence of new themes (Boyatzis, 1998). Our analysis of the data from all 37 interviews revealed meaningful differences between the two sub-samples for 13 of the 14 themes, including a complete absence of three themes in the exceptional leadership talent sub-sample that showed substantial presence in the below-average sub-sample (see Appendix D). To achieve parsimony in our results and thinking ahead to our development of a revised theoretical framework, we eliminated the theme that was not meaningfully different in the two sub-samples (formal business/leadership training), two themes that showed less differentiation than the others (learning from mentors and bosses and doing rather than leading), two themes that were essentially the opposite of two of the other 79

104 themes (mission/vision motivations for joining the family business the opposite of obligatory or entitled motivations, and taking responsibility for own actions the opposite of being shielded from risks/consequences of failure), and combined two themes that expressed different dimensions of the same theme (experiencing multiple levels of supportive family relationships and family environment characterized by unresolved conflict). This yielded eight themes, four that showed meaningful presence in the exceptional leadership sub-sample but not in the below-average sub-sample, and four that showed meaningful presence in the below-average sub-sample but not in the exceptional leadership sub-sample. Findings Our findings reveal meaningful differences in the leadership experiences and behavior of family leaders, particularly next-generation family leaders, in the exceptional and below-average leadership sub-samples. The differences are not so much in the types of experiences as in the nature of those experiences. The non-family leaders in both subsamples have quite similar leadership development experiences and behavior, suggesting that family business owners in sub-samples recognize and value leadership talent, and that they go outside the family to find it. A summary of the eight major themes that emerged in our study and the degree to which they are present in each of the sub-samples is shown in Table 6. 80

105 Table 6. Summary of Findings All Leaders SGF Leaders NGF Leaders NFL Leaders EX BA EX BA EX BA EX BA No. Theme n=20 n=17 n=4 n=4 n=8 n=7 n=8 n=6 1 Early Leadership Learning 70% 24% 75% 0% 75% 0% 63% 67% Experiences 2 Job Assignments with Authentic 95% 53% 75% 50% 100% 14% 100% 100% Responsibility and Accountability 3 Demonstrating Emotional and 95% 35% 100% 25% 88% 0% 100% 83% Social Intelligence 4 Engaging in Personal Reflection 80% 35% 75% 25% 88% 0% 75% 83% 5 Being Shielded from Risk and/or 0% 35% 0% 0% 0% 86% 0% 0% Consequences of Failure 6 Obligatory or Entitled Motivations 5% 47% 0% 25% 13% 86% 0% 17% for Joining the Family Business 7 Family Business Environment 0% 82% 0% 75% 0% 86% 0% 83% Characterized by Unresolved Conflict 8 Being Promoted to Leadership 0% 35% 0% 0% 0% 86% 0% 0% Positions for Which Not Qualified Code: EX = Exceptional Leadership Talent Family Firms BA = Below-Average Leadership Talent Family Firms SGF = Senior Generation Family Leader NGF = Next-Generation Family Leader NFL = Non-Family Leader Finding 1: Early leadership experiences in high school and college begin to shape the leadership values and practices of leaders in family firms with exceptional leadership talent and establish being a leader as part of their self-identities. 70% of the leaders in the exceptional leadership talent firms (EXLT) credited early leadership experiences in high school or college as important to their development as leaders, while only 24% of leaders in below-average leadership talent firms (BALT) mentioned such experiences. EXLT leaders recounted stories about events that occurred when they served in leadership positions on athletic teams, student government, clubs, residence halls, and other extracurricular activities which began to shape their leadership values and practices. EXLT leaders began to view themselves as leaders through these early experiences. One next-generation(ng) EXLT leader told a particularly powerful story about dealing with a student suicide when he served as residence counselor in 81

106 college and about helping the students under his charge come to grips with what had happened. This experience helped to shape his view that leaders need to have a servant leadership motive a true desire to help others and remains a core leadership value for him. Among the BALT firms, only the non-family leaders (NFL) recounted such early leadership experiences. Some of the family BALT leaders mentioned membership on athletic teams or in clubs, but as members only. Quotes from EXLT leaders that are representative of this finding are shown in Figure 5. Figure 5. Early Leadership Learning Experiences Early Leadership Learning Experiences and being on the honor court at [high school], and being the co-captain of the football team, those experiences were really galvanizing the person that I would become in the future. (Next-generation family leader) I was editor of the high school newspaper. I was in student government. I ran three or four clubs. In college, I was president of the fellowship. It s (leadership) something I like to do, I enjoy. I find it personally rewarding and fulfilling. (Next-generation family leader) as a leader, you ve gotta be willing to go somewhere you haven t been before. I m thinking way back to that fraternity experience. We hadn t been there before. None of the other fraternities were they were all having hell week. But it just seemed right. Following your gut sometimes, pretty important, and be enthused about what I like what I do. (Senior generation family leader commenting on making decision to end hazing as president of his college fraternity) Finding 2: Family business leaders in firms with exceptional leadership talent have typically held a series of jobs with increasing levels of authentic responsibility and accountability. While the gap between EXLT and BALT firms on this finding is not as wide as in our other findings, the difference in the experiences of next-generation family firm leaders in the two sub-samples is meaningful, making this a key discovery. All of the NG EXLT leaders described a career characterized by a series of jobs with genuine 82

107 responsibility and accountability, inside and often outside the family firm; while only one of the NG BALT leaders experienced a marginally similar career path. Common experiences indicative of this theme are working outside the family business in a leadership role, learning to make complex decisions to balance multiple and sometimes competing goals, running businesses or divisions with bottom-line responsibility, working for non-family leaders who provide accurate feedback, competing for leadership positions, making tough decisions, leading through a crisis, and having a variety of well-defined jobs. Leadership lessons learned in these jobs were not necessarily related to success or failure of specific initiatives. In fact, leaders in both subsamples talked about failures and successes. The value of the experience seems to come from squarely facing a difficult challenge, the struggle to overcome it, a feeling of responsibility for the ultimate outcome, and experiencing the consequences of one s own decisions. Quotes from interviews with EXLT leaders that illustrate this finding are show in Figure 6. Figure 6. Job Assignments with Authentic Responsibility and Accountability Job Assignments with Authentic Responsibility and Accountability I gave every employee their last paycheck and shut the operation down. I went to the hospital twice for anxiety attacks. So, for the first time in my life, no amount of hard work was gonna fix it. (Next-generation family leader) So this is now the third company I ve run within our organization. At this point, I m early 40s and much more self-assured, in terms of knowing who I am and how I like to work. (Nextgeneration family leader) It was a turnaround facility. So, I mean, we lost millions of dollars the first year. Going to the family to say, "I need a loan," is not a pleasant experience. And so it was off the radar in the sense that it wasn't something my dad actually knew a lot about, wasn't something that my grandfather had done it was very much a distress situation, so it wasn't easy, and it's still not easy. But, whether it died or thrived, I felt was on my shoulders. It's my sink-or-swim. but I very much felt like when our trustees get their board book, and there's a P&L in there, that's my name that's next to it. and it's been one that's been a really successful turnaround story. So, for me, it could have potentially gone the other way. (Next-generation family leader) 83

108 Finding 3: Leaders in family businesses with exceptional leadership talent overwhelming demonstrate emotional and social intelligence, while there is a remarkable absence of these skills among the family leaders in the firms with belowaverage leadership talent. The emotional and social intelligence (EI/SI) skills were the easiest-to-spot differentiators in the behavior of the leaders in our two sub-samples. All but one of the EXLT leaders exhibited multiple indicators of EI/SI in the experiences they related, while only one of the family leaders in the BALT sub-sample demonstrated appreciable EI/SI skills. EXLT leaders often mentioned parents, bosses, or mentors whom they admired and strived to emulate who had high levels of EI/SI and told stories about specific experiences that helped them develop EI/SI traits like self-confidence and the ability to effect change. On the other hand, BALT family leaders with low EI/SI often told stories about parents and other family members who also demonstrated low EI/SI. BALT leaders exhibited a remarkable degree of tone deafness to EI/SI, failing to learn from the negative consequences of their behaviors and repeating the same leadership mistakes. Specific indicators of EI/SI traits revealed in the stories we heard from EXLT leaders included developing self-confidence, feeling fortunate, enjoying challenges, intellectual curiosity, taking initiative for their own leadership development, being competitive, taking risks, valuing employees, valuing teamwork, driving change, establishing vision, and coaching others. Specific indicators of a lack of EI/SI in the experiences recounted by family BALT leaders included doubts about their own abilities, an almost desperate desire for respect, contradictions between words and actions, 84

109 overestimation of their own abilities, arrogance, quitting when challenged or frustrated, failing to take initiative for their own leadership development, being risk averse, not valuing employees, claiming undeserved credit, expressing contempt for authority, finding fault with other leaders, destroying trust, undermining others, resisting change, devaluing teamwork, insubordination, and insisting on having their own way. Expressions of the presence of EI/SI traits in EXLT leaders and the absence of EI/SI traits in BALT family leaders are displayed in Figure 7. Figure 7. Demonstrating Emotional and Social Intelligence Demonstrating Emotional and Social Intelligence Exceptional Leadership Talent Firms Below-Average Leadership Talent Firms That whole values-based leadership chapter in our company is the richest, the deepest, and the most profound block of time I believe in the history of the company. (Next-generation family leader) And sometimes our personalities get in the way cause we re all very strong personalities and maybe my technical way of looking at things is the best and forget your human resource way of looking at things. (Next-generation family leader) And then very much my dad he's a very special guy. He's incredibly intelligent. So he has a lot of the intelligence my grandfather has, but he's got the emotional wiring as well. (Next-generation family leader) he just chews them up and spits them out, and I m amazed that people continue to work for him. (Non-family leader on next-generation family leader) but the biggest issue they had at the station was they didn t think they could win. There was no question in my mind that, at the end of the day, we were going to win. (Next-generation family leader) My dad was not a great teacher. He was very much an entrepreneur, but he was very autocratic in his approach. Before meetings, he d say okay, I m sorry, but I need to go in there, and I need to rip you to shreds, but I don t really mean it. (Next-generation family leader) Finding 4: Personal reflection plays a meaningful role in the ability of family business leaders in firms with exceptional leadership talent to learn leadership lessons from their experiences. 85

110 80% of EXLT leaders gave examples of reflecting on experiences to glean meaning from them - which in turn led to an important decision, influenced their leadership philosophy, or changed their practice of leadership in some way. Only 35% of BALT leaders related accounts of reflections that led to meaningful change. The gap was even wider for family BALT leaders, with only one SG BALT leader and none of the NG BALT leaders mentioning such experiences. A common indicator of this theme was the decision of NG EXLT leaders to join their family businesses. Surprisingly, many of these exceptional leaders said they thought they would never enter the family business while growing up or early in their working careers. Reflecting on work and life experiences, and often participation on family councils or family business boards, helped them discover that working for the family firm would provide an ideal vehicle for them to express their personal mission and vision of what they dreamed of achieving in life. Some examples of personal reflections we heard about in our interviews are shown in Figure 8. Figure 8. Engaging in Personal Reflection Engaging in Personal Reflection Then I came into the next job the next time and I think I really just had to think harder about why wasn t I good at it before? What could I do to be better at it? (Next-generation family leader) Part of it is I ve been around some people with high EQs, and seeing that I know, for me, I have a tendency to get too work focused, and one needs to have a life and a richness to it. I d also say the other thing for me was I it s reflection. (Next-generation family leader) Well, I think what changed me was actually, I think the change happened for those three months. I think what the three months gave me was a pause and time to reflect. I think I m someone who one of the things I always try for is lots of activity, but you need to step back and think have time to reflect. I think that there had been growth over the two years that I d been working on things that I d learned about myself and about the business world, as well as kind of a time to review what the next step was. Because I had really stopped my life to go do this thing. (Next-generation family leader on deciding to join family business) 86

111 Finding 5: Being shielded from the risk and consequences of failure denies next-generation family business leaders valuable opportunities to develop their leadership talent. We view this finding as one of the most important discoveries of our study. All of the BALT family firms except one exhibited this theme, which was driven entirely by the experiences of the NG BALT leaders. We coded for this theme when we observed NG BALT leaders whose leadership positions had been specifically designed to protect them from the risk of failure, their leadership roles were poorly defined, they did not receive accurate feedback on their performance, they avoided real responsibility, they were moved around in the family firm following unacknowledged failures, they were not held accountable for results, they watched leadership being practiced by others rather than exercising leadership themselves, they were held to a different standard than nonfamily employees, they exhibited over-reliance on non-family leaders with whom they worked, or they destroyed company value without being held accountable in some way. Sometimes the effort to shield NG BALT leaders from the risk of failure was quite overt, with the SG leader of one BALT family firm explicitly stating that he created jobs for NG family BALT leaders in which they could not fail. In other examples, the shielding effort was more subtle. Often, a non-family leader was hired to work with or for the NG family BALT leader to absorb the risk of failure. The efforts to shield NG BALT family leaders from the risk and consequences of failure denied them the opportunity to learn from mistakes. The contrast with the experiences of NG EXLT family leaders could not have been clearer. One NG EXLT leader told of two trips to the hospital with anxiety attacks 87

112 when the division of the company he was running early in his career failed and he had to hand final paychecks to the 60 employees who worked for him. NG EXLT leaders often credited struggles with failure as crucial to their development as leaders. Examples of this theme among NG BALT family leaders and its absence from EXLT firms are shown in Figure 9. Figure 9. Being Shielded from Risk and/or Consequences of Failure Being Shielded from Risk and/or Consequences of Failure Exceptional Leadership Talent Firms Below-Average Leadership Talent Firms Well, they re innovative. They re quick and public about telling you that it s okay to fail. You need to be out there trying because if you didn t fail, you wouldn t be trying anything particularly new. (Nonfamily leader on family leaders) I remember when I came back, the first combine I sold, I sold to XXX. I m sitting out back of his house you remember your first combine. I m about years old. XXX (an NG) is about 55 years old. He s out there with his dad. We re sitting in the picnic table, and XXX couldn t make that decision at 55. I can sell the combine; I m 29. He couldn t make it at 55. He never did become a very good manager. His dad was sitting there. His dad was 70-some years old, made that decision. So you gotta let young people you gotta give them increased responsibility, and hell, they ll they re not gonna make any more mistakes than I made. There s no way in hell you can. I made every mistake possible. (Senior generation leader on importance of learning from mistakes) One of the criteria that (SG) and I had defined was that whoever (NGs) came into the business could not fail. We had to provide a location and a task that would allow them success because exposure of the XXX family name really did not have any taint of failure, and it would be devastating for any one of the youngsters to enter the business and to become a failure. (Non-family leader on shielding nextgeneration family leaders from failure) Yes, they were sheltered. Absolutely, they were sheltered. We created jobs so they (NGs) would not fail. All of them (NGs) yes. I think that was wrong, in hindsight, and maybe that s part of I should have stepped up to (SG) and said damn it, you gotta give these kids an opportunity to fail. (Non-family leader on shielding next-generation family leaders from failure) I really don t have a title. (Next-generation family leader) Finding 6: Family business leaders who join their family firms out of a sense of obligation or entitlement fail to develop their leadership skills to the same extent as those who join because the family firm represents an opportunity for expression of their own passion and sense of purpose. 88

113 Nearly half of the leaders in BALT family firms and all but one of the NG BALT family leaders decided to work for the family business because they felt obligated and/or pressured to join, or because they saw a leadership position as something to which they were entitled. In contrast, all but one of the family EXLT leaders talked about how they came to realize that providing leadership for the family firm represented an opportunity for meaningful self-expression, and that it was this discovery that led to their decision to join the family business. We coded for presence of an obligatory or entitled motivation for joining the family firm when we leaders in the study told stories that indicated they were not following their passion, saw their work as burdensome, were taking advantage of their status as a family member, were unhappy, or failed to mention any stewardship responsibility for the family enterprise. We coded for the absence of this theme when leaders told stories that indicated their leadership in the family firm provided them with an opportunity to pursue a personal interest, dream, or passion and/or express a purpose higher than making money; when they said they enjoyed the practice of leadership; and when they expressed a stewardship responsibility for the family enterprise. Examples of what we heard from BALT leaders who had obligatory or entitled motivations for joining the family firm and from EXLT leaders who joined their family firms out of sense of genuine self-expression and stewardship are displayed in Figure

114 Figure 10. Obligatory or Entitled Motivations for Joining the Family Business Obligatory or Entitled Motivations for Joining the Family Business Exceptional Leadership Talent Firms Below-Average Leadership Talent Firms I think they go out of their way, maybe more so than in almost any business I've seen, not to have a sense of entitlement. If you came as an outsider into a XXX managers meeting, you wouldn t be able to tell who is the owner/operator versus the nonowner/operator. (Non-family leader on family leaders) I think we hadn t done well, as a family, communicating with the first and second generation, or even amongst all of us siblings in the second generation, of what we really want out of life or positions. I don t know that we ever really were open and say, I wanna be here for the rest of my life, or I don t. (Senior generation family leader) I came to this company (family business) because I first of all, I came because of the family heritage, as a piece, but I also came to the company because and I really had to do some soul searching about this because I think it s a unique opportunity when you have an ownership in a company aligned around trying to do something good in the world. (Nextgeneration family leader) And the values that I was raised with in those 12- and-under years that we talked about earlier were screaming at me. (Next-generation family leader on decision to join family business) But I think the other piece is my job, that I was willing to accept, is to try to leave this company stronger and better and more impactful for the nextgeneration. (Next-generation family leader) Well, I think probably the most succinct way to say it is that I grew up in a time and family when there was a pretty strong expectation that, if you had a successful family business, you'd go into the family business. (Next-generation family leader) Having a family business is it s a double-edged sword. It s great because you know you have that security and you know that you if you do what you re supposed to do, you ll always have a job, but at the same time, it also gives you a false sense of security because and that s what to be honest with you, that s what really kept me from succeeding in college the first time, was just having this thought in the back of my mind that I d always have something to fall back on. If I don t make it, I ll be fine. My family s got money. (Next-generation family leader) Finding 7: Family business environments characterized by unresolved family conflict impede the development of leadership talent. We consider this to be another of the most important findings of our study. Our interviews revealed that 82% of the BALT family firms have cultures of conflict among key family leaders. On the other hand, none of the EXLT family firms demonstrated ongoing, unresolved family conflict. This is not to suggest that we did not hear stories 90

115 about conflict among EXLT family leaders. The difference is that the EXLT family leaders demonstrate the ability to resolve conflict and the BALT leaders do not. All six of the EXLT firms in our study have formal governance mechanisms like boards of directors with independent outside directors, family meetings, and/or family councils that appear to play an important role in their ability to resolve conflict. It seems likely that the higher levels of EI/SI observed in EXLT family firm leaders also play a meaningful role. The stories that NG BALT family leaders told us reflect their pre-occupation with the family conflict they observe and the personal pain they experience as a result, suggesting that it represents an obstacle to the development of their own leadership talent. We coded for unresolved family conflict when we heard stories about growing up in families with a high level of conflict, two or more family members involved in the business who frequently argued, family members being kept in the dark about important family business issues, sibling rivalry, internecine strife, splitting up the family business, and being criticized but rarely praised by other family members. Examples of indicators of unresolved conflict in the family business environment are shown in Figure

116 Figure 11. Family Business Characterized by Unresolved Conflict Family Business Characterized by Unresolved Conflict Exceptional Leadership Talent Firms Below-Average Leadership Talent Firms I had amazing support from my mother. (Next-generation family leader) I d say oneness if I had to boil it down to one word. We basically say that we may not agree, but we will come to a consensus and we will support that consensus. We all speak with one voice. We think it s important for the company to know that we are a strong family and we want to perpetuate a strong family business. (Next-generation family leader) We do staggered, two-year rotating seats on the board of directors, with the goal being to raise the depths of understanding that owners that family members have of how the company functions and how the values of our founders and the values of our family get implemented in the actual governance of the company. (Next-generation family leader) And the fighting between my aunt s husband, my uncle, and then my dad s brother in the hallways, I couldn t stand it. I was very young then. I mean, I was still in high school, but I was embarrassed. It was embarrassing. (Next-generation family leader) When they were in the middle of some of these blowups because they would not be infrequent in nature the minute it got a little testy my office was right across the hall from (SG) s. (SG) would storm out of the office, he would be in my doorway, and he would say you have to come in here. I m having a discussion with my son, and I need you. (Non-family leader on family conflict) I almost think that they should all step back and just be owners cause and let somebody else that they trust run the show because as hard as it is to run a family business because of all the arguments that they get into. (Next-generation family leader on senior generation family leaders) Finding 8: Family firms that promote next-generation family members to leadership positions for which they are not qualified impede the development of their leadership talent. This was another of our findings that was driven entirely by the experiences of the next-generation family leaders in the BALT firms. All but one of the NG BALT leaders in our study told stories that indicated that they had been promoted to one or more leadership positions for which they were not qualified. This is not to suggest that the NG BALT leaders might never have been ready for the position to which they were promoted, but rather that they were promoted too early - without the necessary training, 92

117 skills, or experience. Nor is it to suggest that the EXLT leaders were not challenged in new leadership positions to which they were promoted that was often the case in the stories they told about their promotions. The difference was that NB EXLT leaders had established track records of achievement in previous positions, inside and/or outside the family firm, that demonstrated their readiness for increased levels of responsibility. We coded for this theme when we heard stories that indicated NG family leaders held pseudo-leadership positions, valued position over performance, pretended to have better performance than the stories they told indicated, struggled with the demands of their job without indicating that they had eventually learned to meet those challenges, and/or seemed to be searching for opportunities to have real responsibility. We also coded for this theme when the research participants told us that the family owners made it a practice to find or create positions in the business for family members regardless of qualifications. Examples of NG BALT members being promoted to positions for which they were not qualified are show in Figure 12. Figure 12. Being Promoted to Leadership Positions which Not Qualified Being Promoted to Leadership Positions for Which Not Qualified Yeah, I had when I was running the manufacturing plant, that company it used to make buckets of money. Being in the XXX industry, it always had a cycle. But as soon as I seemed to step in the door, the bottom dropped out of the whole thing, and we started losing bags of money. I could not figure out what the heck was going on. (Next-generation family leader) And you get one of these phone calls from my uncle saying, you know, we think that you would make a really good general manager, but we don t know. Would you like the job? That s one of those decision points in your life that you you know that if you say no you ll never get the chance again, so you say yes and you hope like hell that you can make it work out. (nextgeneration family leader) But recently I got they said it was a promotion, but it really wasn t. To be honest for [sic] you, I m really not the right man for the job because I don t have the knowledge for it. (Next-generation family leader) 93

118 Discussion Our study was motivated by the lack of research on how leadership talent is developed in family businesses. Our interviews with 37 leaders in 11 different family enterprises revealed meaningful differences in the nature of the experiences, leadership characteristics, and motivations of leaders in family businesses with exceptional leadership talent and those with below-average leadership talent, particularly among next-generation leaders. Eight key themes emerged from our analysis of the interviews, four associated with the development of exceptional leadership talent and four associated with the development of below-average leadership talent. The conceptual framework shown in Figure 13 reflects our theory of how these eight factors influence the development of leadership talent in family firms. Our framework is informed by authentic leadership theory, which posits that authentic leaders are true to themselves, do not fake leadership; are motivated by deeply held convictions rather than by self-seeking status or personal rewards; and are originals, not copies, leading from a set of values they have adopted through reflection on their own life experiences (Avolio & Gardner, 2005; Shamir & Eilam, 2005). Development of authentic leadership talent involves adopting leadership as part of one s self-concept and pursuing goals that are aligned with one s self-concept and values (Shamir & Eilam, 2005). We saw these characteristics and pattern of development to a much greater extent in our exceptional leaders than we did in our below-average leaders. As one of our exceptional next-generation leaders explained his decision to join the family firm after working outside the family firm for a number of years, And the values 94

119 that I was raised with in those 12-and-under years that we talked about earlier were screaming at me. Figure 13. Conceptual Framework of Factors that Influence Leadership Development in Family Businesses The fundamental emotional and social intelligence (EI/SI) competencies of selfawareness, self-management, social awareness, and relationship management (Goleman et al., 2002) were strongly present among the exceptional leaders in our study and remarkably absent in the below-average leaders. While EI/SI competencies are important for leaders in any organizational setting (Boyatzis & McKee, 2005; Goleman et al., 2002), our study suggests that they are even more critical in family businesses for two reasons. 95

120 First, family firm leaders must create resonance (Boyatzis & McKee, 2005) in all three sub-systems of a family enterprise - the business system, the family system, and the ownership system, as shown in Figure 14. People who occupy different positions in the system are likely to have different perspectives on the operation of the family enterprise. The stories we heard from the exceptional leaders in our study reflect their ability to balance the demands of all three sub-systems, which requires strong EI/SI ability. Figure 14. Three-Systems Family Business Model Gersick, Kelin E., Davis, John A., Hampton, Marion McCollom, & Lansberg, Ivan Generation to generation: Life cycles of the family business. Harvard Business School Press, Boston. The second reason EI/SI skills are so critical for family enterprise leaders has to do with the inescapable fact that while we can change our places of employment, we can never change membership in our family. Family leaders in our study who lacked EI/SI skills often described a lifetime of unresolved conflict in family relationships, which spilled over into the operation of the family enterprise. As one middle-aged member of a next-generation sibling leadership team in a family plagued by conflict told us, We kind of got ourselves to a place where everybody had consensus that we just were not happy 96

121 people. An unhappy or unfulfilled non-family leader can simply walk out the door to seek a more satisfying employment situation, but even if a member of a business-owning family leaves the family firm, he cannot leave the family system and often finds it difficult or quite costly to exit the ownership system. The lack of EI/SI skills contributes to the dissonance and conflict among family members, which in turn inhibits the development of EI/SI competencies and leadership talent. Consistent with the thesis developed by McCall et al. (1988), our study demonstrates that on-the-job leadership experiences can be powerful developers of leadership talent. However, it is the nature of those experiences that determines their value in developing leadership talent. Family enterprise leaders with exceptional leadership talent described job assignments with real leadership responsibility and accountability, often crediting their struggles with difficult challenges, failures, and crises as the ones from which they learned the most. McCall et al. (1988) found this in their study as well and theorized that the most effective development experiences often involved confronting adverse circumstances or overcoming obstacles. Shamir, Dayan- Horesh, & Adler (2005) identified struggle and hardship as one of four broad themes of leadership development in their study of leaders life stories. On the other hand, the below-average next-generation leaders in our study described job assignments in which they were in some way shielded from the risk of failure, often being moved around in the family business before they had to deal with the consequences of their own behavior and/or holding pseudo-leadership positions but relying on non-family leaders to shoulder the real responsibility. 97

122 Intentional Change Theory (Boyatzis, 2008) provides one explanation of why this shielding from risk impedes leadership development, as it denies a next-generation family leader the opportunity to accurately perceive his/her real self. Denied the opportunity to see the gap between that real self and an ideal leader self, the next-generation family leader lacks the motivation to change leadership behavior. Our theory of nextgeneration-family business leadership development suggests that this shielding from risk allows the next-generation leader to create a false pseudo-leadership identity (see Figure 13), as in the king has no clothes fable. Our research extends McCall et al. s (1988) experiential development thesis and Intentional Change Theory by demonstrating their unique applications to the family enterprise context. Our study shows that motivation for joining the family business has a dramatic effect on the development of leadership talent, particularly among next-generation leaders. Sharma & Irving (2004) define four primary motivations behind the decision to join the family firm: affective, normative, calculative, and imperative. Family members who join the family firm with an affective motivation want to (Sharma & Irving, 2004) to join because they see working in the family business as a way to pursue their own life goals and career aspirations. Family members with an affective motivation see working in the family firm as an opportunity to create Intentional Change Theory s ideal self (Boyatzis & McKee, 2005). Family members who join the family business with a normative motivation join out of a sense of obligation (Sharma & Irving, 2004) a motivation fueled by their desire to satisfy their real or perceived expectations of senior generation family members. A normative motivation reflects the pursuit of Intentional Change Theory s ought self, which blocks positive change and personal development 98

123 (Boyatzis & McKee, 2005). Family members who join the family enterprise with a calculative commitment perceive that they have to (Sharma & Irving, 2004) join because of the opportunity costs of choosing another career choice. For example, they may feel that they must join to protect the value of their ownership stake. Family members who join the family business with an imperative motivation feel that the need to join (Sharma & Irving, 2004) because they doubt their own ability to achieve career success outside of the family firm. Our study of family leaders shows a strong relationship between affective motivation to join the family business and the development of exceptional leadership talent; and between normative, calculative, and imperative motivations to join the family business and below-average leadership talent. Sharma & Irving (2004) suggest that family members who join with normative, calculative, and/or imperative motivations put forth less discretionary effort than family members with affective motivations, which may explain part of the difference. We also observed that calculative and imperative motivations were frequently associated with an entitlement mentality among nextgeneration family leaders, the attitude that they deserved a leadership position in the family firm because of their status as family members, rather than because of their leadership skills. We have labeled normative, calculative, and imperative motivations as obligatory or entitled motivations for joining the family business in our conceptual framework in Figure 13. Shamir & Eilam (2005) theorize development of leader identity as a central component of a person s self-concept, one of four components of authentic leader development. The family business leaders with exceptional leadership talent in our study 99

124 reflected this idea as they often described early leadership experiences in high school or college as experiences that caused them to begin to think of themselves as leaders. We were struck by how our exceptional family business leaders learned from their experiences and how the below-average leaders repeated the same mistakes, rarely changing their leadership practices. Part of the explanation for this disparity is that below-average leaders are often shielded from risk and consequences as described earlier, but the extent to which our leaders engaged in personal reflection is another key factor. Our exceptional leaders often engaged in reflection and our below-average leaders rarely mentioned reflecting on their experiences as a catalyst for change. Intentional Change Theory (Boyatzis, 2008) explains that change can only take place when there is a recognized gap between an envisioned ideal self and the real self, something that requires deep self-reflection. This concept is supported by Shamir and Eilam (2005), who developed an elegant theory on authentic leadership development based on how leaders construct their life stories, extracting meaning from their experiences through reflection. Ongoing, unresolved conflict in relations among family members involved in the family business surfaced as a major deterrent to the development of leadership talent among family leaders in our study. This is not surprising because there is a greater potential for long-term conflict in family firms than there is for a non-family businesses (Morris et al., 1997). Constant conflict arouses what Intentional Change Theory (Boyatzis & McKee, 2005) identifies as negative emotional attractors., powerful arousals of the sympathetic nervous system stimulated by negative emotions like fear, self-doubt, greed, dislike, dissension, and jealousy emotions we often heard expressed by the below-average leaders in our interviews. The arousal of the sympathetic nervous system 100

125 activates the part of our primal brain (Goleman et al., 2002) that triggers the fight or flight response. The most creative part of our brain shuts down and inhibits our ability to solve complex problems and learn from our experiences. Long-term immersion in a conflicted environment results in cynicism, despair, and anxiety (Boyatzis & McKee, 2005), and creates a negative emotional attractor loop that inhibits learning leadership skills like the emotional and social intelligence competencies which are so critical to effective leadership (Goleman et al., 2002). This is what we observed in the family firms with below-average leadership talent. On the other hand, the exceptional leaders in our study also experienced conflict in the family business, but their families had developed the ability to resolve them. Sometimes this was because of the presence of one or more family leaders high in emotional and social intelligence. Often, this was because the family had created mechanisms like family meetings, family councils, and governance structures to facilitate conflict resolution. Our study demonstrates that effective conflict resolution processes and family leaders who demonstrate emotional and social intelligence stimulate the positive emotional attractors identified in Intentional Change Theory (Boyatzis & McKee, 2005). Positive emotional attractors like hope, enthusiasm, love, humor, and compassion stimulate the parasympathetic nervous system and activate the neural circuits that facilitate creativity and learning (Boyatzis & McKee, 2005). A positive emotional climate facilitates the development of leadership talent just the opposite of what happens when there is the kind of ongoing unresolved conflict we observed in our belowaverage family firm leaders. 101

126 Our conceptual framework (Figure 13) reflects our conclusion that the fundamental difference between the two sub-groups in our study is the attitude towards risk among family firm leaders. The senior generation leaders of family firms in our study with exceptional leadership talent embrace the risk of allowing next-generation family members to learn through experience, including the risk of failure. That is not to say that they do not provide support when failure comes. As one wise senior generation leader expressed it, It s sink or swim but with a safety net. What he meant was that if a next-generation leader stumbled, he would help them get back up and try again, but that he would not deny them the opportunity of struggling with challenge. On the other hand, the senior generation leaders of family firms in our study with below-average leadership talent played it safe by shielding next-generation family leaders from the risk of failure. The irony is that by seeking to protect them from failure, they actually set them up for failure. In yet another irony, the senior generation leaders in our study were successful entrepreneurs, well acquainted with risk-taking behavior in building their businesses. Perhaps as the family business becomes successful and grows, the entrepreneur becomes more conservative in his risk-taking because there is more to lose (Cater III & Justis, 2009). Or perhaps, as suggested by one of the non-family leaders in our study, the entrepreneur senior generation leader fears the loss of his own status in the community if one of the next-generation family leaders fails. Risk aversion was not limited to the senior generation leaders in our belowaverage firms, as the next-generation family members in these enterprises also played it safe by accepting pseudo-leadership positions, often staying in such roles for many years. Ward (1997) has observed that next-generation leaders often avoid the risk of failure 102

127 because they feel tremendous pressure in following successful parents or other relatives in family business leadership roles. Our study makes a contribution to leadership and family business literature by exploring how well established leadership development theories like emotional and social intelligence, Intentional Change Theory, experiential development, and authentic leadership theory operate within a family enterprise context. We theorize that family climate mediates the extent to which leadership development actually takes place, particularly among next generation family members. One example of this family effect is the extent to which actors in a family firm embrace risk in the development of nextgeneration leaders. Family firms that encourage next-generation family members to assume reasonable risks facilitate authentic leader development. Family firms that shield next-generation family members from risk impede the development of leadership skills. While it was not the focus of our study, we doubt that this shielding effect is present in non-family businesses. The paradox is that family firms must embrace risk in order to limit risk in developing authentic leadership talent in next-generation leaders. Limitations As with any qualitative study of this nature, certain limitations are acknowledged. Our sample of 37 family business leaders from 11 privately held firms was small and non-randomly selected. Firms selected for the study were subjectively assessed as having exceptional or below-average leadership talent by those who nominated them, although we addressed this limitation by securing multiple nominations for each firm and by choosing acknowledged experts in the field of family business to make the nominations. 103

128 As discussed by Strauss and Corbin (1998), there is an inherent risk of interviewer bias in qualitative research. The principal investigator in this study worked as the senior non-family executive for a mid-market family enterprise for 34 years and has become familiar with the stories of hundreds of next-generation members of business owning families through teaching a course on family business at a major U.S. university. Although every effort was made to hear and interpret the experiences related by interview subjects with a mind open to new discovery, the possible influence of the investigator s years of experience are acknowledged. Our study relied on the interviewees recollections of events that occurred over the span of many years, so there is always the possibility of fading memories or biased interpretation of those lived experiences. We are reassured, however, by Shamir and Eilam (2005) who assert that authentic leadership rests heavily on the meanings derived from the construction of one s life story. Implications for Practice and Future Research Our study offers important insights for family business leaders and advisors. Family business advisors often counsel their clients to ensure that next-generation family members get experience outside the family business, as well as broad array of assignments within the family firm to prepare them for future top leadership responsibilities. Our study suggests that while this is good advice, it is the nature of those experiences that determines whether or not those experiences are likely to foster the development of authentic leadership talent. If those experiences involve jobs with real responsibility and accountability, then the development of leadership skills is likely to take place. On the other hand, if next-generation family members are shifted from one 104

129 job assignment to another without genuine responsibility, consequences, and the risk of failure, they are unlikely to develop strong leadership skills. Suggestions for future research include the need to examine more closely the relationship between leadership talent among family leaders in family firms and performance (Neff, 2011). Statements made during the interviews suggested that all of the firms in our study were doing reasonably well financially, but we did hear comments that suggested financial performance in several of the firms with below-average leadership talent was less than it could have been. A closely related topic for future research is the role of non-family leaders in family enterprises. The non-family leaders in both of the sub-samples in our study shared leadership characteristics associated with exceptional leadership talent, suggesting that family firms recognize and value the contributions of talented non-family leaders, possibly for different reasons. Perhaps this is part of the explanation for why the family firms in our study with below-average family leaders still performed well financially. A comparison of leadership development in family-owned firms and public companies would also make a valuable contribution to family business and leadership literature. While our study was not designed to compare family and non-family firms, it is difficult to imagine that the shielding from risk and consequences of failure, the promotion of unqualified leaders, and ongoing conflict would be tolerated in a public company to the same extent that they were in the below-average family firms in our study. 105

130 CHAPTER III: DEVELOPING NEXT-GENERATION LEADERSHIP TALENT IN FAMILY BUSINESSES: FAMILY CLIMATE MATTERS Introduction Next-generation family business leaders face a set of challenges unique to familyowned enterprises. Not only must they meet the challenges of sustaining a successful business as any business leader must do, but they must also negotiate the complexities of the family and ownership systems that are integral and overlapping components of family enterprises (Gersick et al., 1997). And they must do this with the knowledge that the multi-generational survival rate for family firms is not good. Only 30% of family businesses survive from the first to the second generation of family ownership, only 12% survive from the second generation to the third, and only 4% survive from the third generation to the fourth (Poza, 2013). In a survey of family business owners, Ward (1997) found that weak nextgeneration leadership was perceived as one of the top three threats to long-term family firm success, along with maturing business cycles and limited access to capital. In his classic work, Family Wealth: Keeping It in the Family, James Hughes argues that the most effective way for business-owning families to preserve and grow their wealth is to develop their human and intellectual capital (Hughes Jr & Hughes, 2004). Unfortunately, most families get that backwards with a focus on ownership structure, estate tax, and investment policies dominating their thinking about succession planning (Morris et al., 1997). This is important because family business transitions occur more smoothly when heirs are better prepared for leadership responsibilities (Morris et al., 1997). Effective next-generation leadership is critical for those business-owning families who want the 106

131 businesses they have worked hard to create to prosper through multiple generations of family ownership. So what can family firms do to foster the development of the leadership talent next-generation leaders need to successfully negotiate the complex challenges of leading a multi-generational family-owned enterprise? How can next generation family leaders learn leadership skills and earn the respect of those whom they will lead while often living in the shadow of a successful entrepreneur who built or grew the business; who also happens to be a father, mother, or other close relative? How can next-generation leaders do the hard personal developmental work of differentiating themselves from the family (Kerr, 1988) when so much of their identity is defined by the successful businessowning family (Björnberg & Nicholson, 2012)? And how can next-generation leaders develop the skills necessary to balance the demands of the business system, the family system, and the ownership system; the three systems that comprise a family enterprise (Gersick et al., 1997)? Some excellent research has been done on leadership development in large public corporations (Conger & Benjamin, 1999; McCall Jr et al., 1988), but there is very little in the literature on how leadership talent is developed in family-owned enterprises. Fiegener et al. (1994) point out that very few studies have explored how future leaders are developed in family firms. To address this gap in the literature, and drawing on emotional and social intelligence theory, intentional change theory, self-determination theory, and family systems theory, we designed a quantitative study to follow up on the results of a qualitative study we conducted in 2012 that compared highly effective and below average next-generation leaders of family enterprises (Miller, Boyatzis, Boland, & Pierce, 2012). 107

132 The results of our qualitative research suggested important differences in the two groups, including the degree to which next-generation family leaders exhibited emotional and social intelligence (ESI) competencies, their motivations for working in the family business, the degree to which they accepted responsibility and were held accountable for their decisions and actions in the family business, relationships among family members, and the climate of the family business itself. We also noticed a marked difference in the level of energy and enthusiasm exhibited by next generation leaders in the two groups when describing their work in the family firm, suggesting different levels of engagement with that work (Miller, Boyatzis, Boland, & Pierce, 2012). The full sample for our quantitative study included 567 family and non-family leaders and employees working in multi-generational family businesses, 185 of whom were next-generation family leaders. The other 382 respondents were multi-raters; members of the family businesses included in the study who answered questions about the leadership practices of the next-generation leaders in their firms using a confidential 360-degree survey format. We required multiple multi-raters for each next-generation leader included in the data set used for analysis of our structural equation model, resulting in a final data set of 100 next-generation leaders matched with 350 multi-raters. The results confirmed much of what we learned in our qualitative study, but provided a deeper understanding of the relationships among factors that influence the effectiveness of next-generation leaders and the degree to which they are positively engaged with their work. Of particular importance is the role of family climate, which exhibited significant direct or indirect effects on every other variable in our model, save one. 108

133 The paper is organized as follows. First we review the key theories that informed the development of our hypotheses and conceptual model. We then provide a detailed description of our research design and methods, as well as a thorough analysis of our measurement model. Next, we report on our findings followed by a discussion of our interpretation of the results. We then point out some limitations of the study and suggest possibilities for future research. We close with our top-line conclusions and implications for family business practice. Theoretical Foundation, Hypothesis Development, and Conceptual Model Management researchers continue to explore how leadership talent is developed. Are effective leaders born with innate leadership abilities or are they made as they learn leadership competencies over time (Dreyfus, 2008)? The literature suggests that many factors are involved in the creation of a leader (Conger, 1998), including genetic traits, family environment, life and work experiences, and formal and informal training (Conger & Benjamin, 1999). While there is not much we can do to influence genetics, there is a great deal we can do to create family and family business environments that provide next-generation family leaders with the kinds of experiences and support the literature suggests fosters the development of leadership skills. A number of theories informed the development of the hypotheses and conceptual model for our quantitative study, which we designed to more fully explore the results of our earlier qualitative study of factors that influence the development of leadership talent among next-generation family business leaders. First, we explored the literature for a working definition of leadership talent and evidence that effective leadership talent matters in a family enterprise. Next, we explored the literature on emotional and social 109

134 intelligence, next-generation family member motivations for working in the family business, the effects of embracing responsibility and accountability on leadership effectiveness, the interaction of family and business systems, the effects of the relational climate of the business owning family, and Intentional Change Theory, which informed our thinking about the possible effects of the relational climate of the family business organization itself. A summary of our review of the literature that influenced our thinking about possible key drivers of the leadership effectiveness and work engagement of the next-generation leaders in our study, our hypotheses, and a diagram of our conceptual model follow. Effective Leadership Leadership has been broadly defined in two ways. The first refers to individuals who hold formal managerial positions. Such leaders may have attained their positions through hard work, intelligence, ambition, political skill, family membership, and/or luck, but they may or may not possess effective leadership skills (Hogan & Kaiser, 2005). True leadership talent involves the ability to persuade followers to suspend their purely selfish interests to support and work towards a common good (Hogan & Kaiser, 2005). Bell (1973) refers to this description of leadership talent as the ability to create commitment in others. Boyatzis and McKee (2005) refer to leaders with true leadership talent as resonant leaders, those who have demonstrated that they are able to blend financial, human, intellectual, environmental, and social capital to create positive results and competitive advantage for their organizations (Boyatzis & McKee, 2005). Leadership talent is critical to our evolution as social beings as it is necessary for group survival (Hogan & Kaiser, 2005), which we extend to the family business domain. 110

135 The literature clearly demonstrates that effective leadership is central to the success of any business, family-controlled or not. In his study of the highly successful turnaround companies featured in Good to Great, Collins (2001) discovered that those companies selected a new CEO first, then adopted a winning strategy developed and executed by that CEO and his/her team, rather than the other way around. Collins refers to these highly effective leaders as Level 5 leaders, who in addition to exhibiting the resonant leadership characteristics identified by Boyatzis and McKee (2005), were modest, humble, and phenomenally persistent (Hogan & Kaiser, 2005). Based on a study of 160 companies and 200 management practices, Joyce, Nohira, and Roberson (2003) estimated that CEOs account for about 14% of the variance in firm performance. Another study conducted by Peterson, Smith, Martorana, and Owens (2003) demonstrated that in 17 very large corporations, CEO personality had a powerful influence on the culture and dynamics of the senior leadership team; which were strongly correlated with income and sales growth, return on investment, and return on assets. Noted family business expert, John Ward (Ward, 1997) emphasizes how important effective leadership is to the sustainable growth of a family enterprise, which often determines a family firm s ability to survive through multiple generations of family ownership. Leadership Effectiveness is one of two dependent variables in our conceptual model, and the one of primary interest. Work Engagement Work engagement is the positive opposite of burnout and has been identified in studies on positive psychology as a central element of well-being at work (Seppälä et al., 2009). It can be described as a positive, fulfilling, work-related state of mind that is 111

136 characterized by vigor, dedication, and absorption (Schaufeli et al., 2002). In our qualitative research, we noticed that the next-generation family leaders we interviewed who had been identified by experts as highly effective leaders exhibited high levels of energy and enthusiasm for their work, the opposite of what we observed in the nextgeneration leaders who had been identified as less effective leaders. We also noticed that the more effective leaders seemed more fulfilled by their work in the family firm. We expected that next-generation family leaders in our study who were perceived to be effective leaders would also report that they were highly engaged with their work. We selected Work Engagement as a second dependent variable, theorizing that the same factors that are related to Leadership Effectiveness would also be related to Work Engagement. Emotional and Social Intelligence How intelligently leaders identify, understand, and manage their own emotions, and the emotions of those with whom they interact, determines the effectiveness of their leadership behavior and the quality of the relationships they create (Goleman et al., 2002). While technical skills are important to job performance at all levels, when it comes to leadership, research has demonstrated that as much as 90% of a leader s effectiveness is determined by emotional and social intelligence (ESI) (Cherniss & Adler, 2000). Emotional and Social Intelligence Theory identifies four domains of ESI: selfawareness, self-management, social awareness, and relationship management (Goleman et al., 2002) and 19 specific competencies associated with the expression of ESI (see Appendix A). While it is often assumed that soft-skills like ESI competencies are 112

137 innate or fixed in early childhood, they can in fact be learned (Cherniss & Adler, 2000; Goleman et al., 2002). Reading, lectures, or seminars can help leaders understand ESI concepts, but actually learning ESI skills requires impactful experiential learning (Boyatzis & McKee, 2005; Cherniss & Adler, 2000; Goleman et al., 2002). A boss who models effective ESI skills reinforces the same behavior in his/her subordinates and helps them learn and practice ESI skills (Manz & Sims, 1986; Weiss, 1977). We expected that family business leaders in our study who exhibit leadership behavior reflective of emotional and social intelligence competencies would be perceived as effective leaders and positively engaged with their work. Hypothesis 1. The emotional and social intelligence competencies of nextgeneration family firm leaders have a positive effect on their leadership effectiveness. Hypothesis 2. The emotional and social intelligence competencies of nextgeneration family firm leaders have a positive effect on the degree to which they are engaged with their work in the family business. Motivation for Working in the Family Firm Self-determination theory (SDT) is a multi-dimensional conceptualization of motivation that has been used to study motivation in a wide variety of contexts including education, sports, work and health care (Deci & Ryan, 1985; Gagné et al., 2010). SDT defines three broad categories of human motivation. Amotivation is defined as the lack of motivation towards an activity. Intrinsic motivation is defined as engaging in an activity because it is inherently enjoyable or interesting. Extrinsic motivation describes the case in which a person engages in an activity to earn a reward, achieve recognition, enhance self-esteem, win approval from others, or avoid punishment or criticism (Gagné et al., 2010). Several types of extrinsic motivation are more narrowly defined depending 113

138 on the degree to which they have been internalized. External regulation describes a motivation that is completely non-internalized. External regulation drives behavior intended to earn a reward or to avoid punishment or criticism. Introjected regulation refers to an extrinsic motivation that has been partially internalized and drives behavior because it creates internal pressure to engage in activities in order to preserve or enhance self-worth or to avoid guilt or shame. Identified regulation refers to behavior that is motivated by a desire to pursue an activity because it has personal meaning or will contribute to achieving one s goals. Identified regulation is highly internalized and drives autonomous behavior. Identified regulation differs from intrinsic motivation in that behavior motivated by identified regulation is driven by values and goals, while intrinsic motivation involves pursuing an activity because of the positive experience produced from the activity itself (Gagné et al., 2010). Researchers often group external regulation and introjected regulation together as non-self-determined or controlled motivation, as studies have shown them to be correlated and they are more external in nature. Intrinsic motivation and identified regulation are often grouped together as self-directed or autonomous motivation as they are also correlated and are more internal in nature. Research has shown that autonomous forms of motivation produce more positive behavioral, attitudinal, and emotional outcomes than controlled forms of motivation (Gagné et al., 2010). Sharma & Irving (2004) propose a motivational theory that is similar to selfdetermined theory but is specifically oriented to a family business context. They define four primary motivations behind a family member s decision to join the family firm that influence their commitment to the family business: affective, normative, calculative, and 114

139 imperative. Family members who join the family firm with an affective motivation want to (Sharma & Irving, 2004) join because they see working in the family business as a way to pursue their own life goals and career aspirations. Family members with an affective motivation see working in the family firm as an opportunity to create Intentional Change Theory s ideal self (Boyatzis & McKee, 2005). Affective motivation is similar to SDT s identified regulation. Family members who join the family business with a normative motivation join out of a sense of obligation (Sharma & Irving, 2004) a motivation fueled by their desire to satisfy their real or perceived expectations of senior generation family members. A normative motivation reflects the pursuit of Intentional Change Theory s ought self, which blocks positive change and personal development (Boyatzis & McKee, 2005). Normative motivation is similar to SDT s introjected regulation. Family members who join the family enterprise with a calculative commitment perceive that they have to (Sharma & Irving, 2004) join because of the opportunity costs of choosing another career choice. For example, they may feel that they must join to protect the value of their ownership stake. Calculative motivation is similar to SDT s external regulation. Family members who join the family business with an imperative motivation feel that the need to join (Sharma & Irving, 2004) because they doubt their own ability to achieve career success outside of the family firm. Imperative motivation is similar to SDT s introjected regulation. Sharma & Irving (2004) suggest that family members who join with normative, calculative, and/or imperative motivations put forth less discretionary effort than family members with affective motivations, and are thus less likely to be perceived as effective 115

140 leaders or as engaged with their work as family members with affective motivations. This conclusion is consistent with self-determined theory s assertion that self-directed or autonomous motivation produces more positive outcomes than non-self-directed or controlled motivation. We expected that family business leaders in our study with autonomous motivation would be more likely; and those with controlled motivation less likely, to be viewed as effective leaders and to be positively engaged with their work. Hypothesis 3. The autonomous (self-determined) motivations of next-generation family leaders for working in the family business have a positive effect on their leadership effectiveness. Hypothesis 4. The controlled (non-self-determined) motivations of nextgeneration family leaders for working in the family business have a negative effect on their leadership effectiveness. Hypothesis 5. The autonomous (self-determined) motivations of next-generation family leaders for working in the family business have a positive effect on the degree to which they are engaged with their work. Hypothesis 6. The controlled (non-self-determined) motivations of nextgeneration family leaders for working in the family business have a negative effect on the degree to which they are engaged with their work. Responsibility and Accountability The literature on leadership and organizational behavior consistently identifies the degree to which leaders accept responsibility and are held accountable for their actions and decisions as a hallmark of leadership effectiveness. Wood and Winston (2005) define leader accountability as the leader s willing acceptance of the responsibilities inherent in the leadership position to serve the well-being of the organization. Their definition includes the leader s expectation that he or she will also be held accountable by others. 116

141 Responsible leaders see themselves as stewards of the organizations they lead and keep organizational stakeholders well informed, thus creating greater commitment to the goals of the organization (Fairholm, 2001). They accept responsibility for the results of the organization even if circumstances outside his or her control cause those results to be less than desirable (Conners et al., 1994; Kouzes & Posner, 2011; Kraines, 2001; Manwaring, 1997). Not only do they accept responsibility for what has happened in the past, but for establishing a shared vision of the future as well (Kouzes & Posner, 2006; Kraines, 2001). Family business expert John Ward (1988; 1997; 2004b) cites shared vision as one of the most important factors in determining the survival and success of a family enterprise through multiple generations of ownership. We expected that the degree to which the next-generation leaders in our study accept responsibility and are held accountable for their actions and decisions would influence perceptions of their leadership effectiveness and the level of their engagement with work. Hypothesis 7. The degree to which next-generation family firm leaders accept responsibility and are held accountable for their decisions and actions in the family business has a positive effect on their leadership effectiveness. Hypothesis 8. The degree to which next-generation family firm leaders accept responsibility and are held accountable for their decisions and actions in the family business has a positive effect on the degree to which they are engaged with their work. The Three-Systems Model of Family Enterprise The three-systems model of family business has become the most accepted and utilized theory of family business (Gersick et al., 1997). Drawing on general systems theory, Davis et al. developed the three-circle model shown in Figure 15 as a way to demonstrate the dynamics of family firms. Unlike a publicly held business that has only a 117

142 business system to negotiate, a family enterprise is composed of three overlapping systems: (1) the family system, (2) the ownership system, and (3) the business system. Consistent with general systems theory, it is the interaction of these three systems that creates the unique dynamics of a family enterprise. If one or more of the systems are ignored by family firm leaders, unhealthy conflict and suboptimal performance of the business are the likely results. On the other hand, if the three systems and their interactions are fully embraced, competitive advantage can be created through what Habbershon and Williams (1999) refer to as familiness, the unique resources and capabilities of a family firm created by this interaction of family and business. We expected that both the climate of the family system and the climate of the family business system would influence the degree to which the next-generation leaders in our study had learned leadership skills, and thus perceptions of their leadership effectiveness, as well as the level of their positive engagement with work. We examined the literature in greater detail for clues on how the cultures of these two systems might influence the development of the next-generation family members in our study as leaders in the family firm. 118

143 Figure 15. Three-Systems Family Business Model Gersick, Kelin E., Davis, John A., Hampton, Marion McCollom, & Lansberg, Ivan Generation to generation: Life cycles of the family business. Harvard Business School Press, Boston. Family Climate Family climate has a strong effect on family business culture and performance (Björnberg & Nicholson, 2007). Björnberg & Nicholson (2007) identified three broad categories that define family climate: (a) family intergenerational style, (b) family cohesion, and (c) family process. Family intergenerational style refers to the degree of authority exercised by the senior generation in a family and to how much time and attention the senior generation devotes to the younger generation. It involves parent and child behavior, which is critical to understanding parenting style (Darling & Steinberg, 1993) and its influence on the development of family leadership. In a family business context, it also refers to the intergenerational style of all senior family members who exercise authority in the family firm, which may include family members other than parents. An intergenerational style that is over-controlling and oppressive may meet with 119

144 resistance and rebellion from younger family members (Walsh, 2003), creating conflict that inhibits the next generation s ability to differentiate themselves and develop their own identities (Kerr, 1988) and leadership skills. On the other hand, an intergenerational style that involves paying adequate attention to the developmental needs of members of the younger generation can foster the acquisition of leadership skills and healthy family functioning (Björnberg & Nicholson, 2007). Family cohesion refers to both cognitive and emotional cohesion. Cognitive cohesion refers to the degree to which family members share worldviews, norms, and values. Cognitive cohesion influences the leadership culture of the family firm and can be used to create competitive advantage through what Habbershon and Williams (1999) identify as the familiness of a family enterprise. Emotional cohesion refers to the emotional bonds among family members. Emotional cohesion can contribute to positive family relationships, but too much emotional cohesion can become dysfunctional, leading to a family system that is rigid and enmeshed (Beavers & Voeller, 1983). A lack of sufficient cognitive or emotional cohesion can lead to destructive conflicts that put the functioning of the family and the family business at risk. Family process refers to the degree of open communication and adaptability in the family system. Open and healthy communication is viewed by family business researchers as one of the most central feature of well-functioning family and business systems (Gersick et al., 1997; Poza, 2013; Ward, 2004a). Adaptability is crucial to responding to changes in the external environment that are essential for family business survival (Walsh, 2003). Research on conflict style in family firms demonstrates the importance of how families face challenges when working and living together, 120

145 particularly when those challenges create strain on family relationships (Danes et al., 2000). A family s conflict style is influenced by how its members communicate and its adaptability and receptivity to change (Björnberg & Nicholson, 2007). These three dimensions of family climate - intergenerational exercise of authority in the family system, family cohesion, and family process - interact to influence how well the family system functions and how conflict is managed. Our qualitative study suggested that a family climate characterized by conflict that goes unresolved over a long period of time has a negative effect on the development of next-generation leadership talent and engagement with work. All of the family firm leaders we interviewed described episodes of conflict. The difference in leadership development outcomes for the next-generation leaders appeared to be influenced by how those conflicts were managed. Were they embraced and resolved; or ignored, allowing them to fester and grow? A study by Ensley and Pearson (2005) demonstrated that top management teams in family owned-firms with higher levels of relationship conflict had poor behavioral dynamics, including lower confidence in the team s abilities, less of a sense of belonging to the team, and a lower degree of consensus on the strategic direction of the firm. This research suggests that it is not only the next-generation family leaders who are affected by unhealthy relationship conflict, but the entire management team and organizational climate. We expected that a family climate characterized by intergenerational attention, family cohesion, and open communication would positively affect the organizational climate of the family business, as well as the constructs in our model expected to 121

146 positively affect the leadership effectiveness and work engagement of the next-generation leaders in our study. On the other hand, we expected that intergenerational authority would negatively affect the climate of the family business and the constructs expected to positively affect the leadership effectiveness and work engagement of the next-generation leaders. We expected intergenerational authority to positively affect the constructs in our model expected to negatively affect the leadership effectiveness and work engagement of the next generation leaders. Hypothesis 9a. A positive family climate positively influences the development of emotional and social intelligence competencies of next-generation leaders in family firms. Hypothesis 9b. Intergenerational Authority negatively influences the development of emotional and social intelligence competencies of next-generation leaders in family firms. Hypothesis 10a. A positive family climate positively influences the autonomous (self-determined) motivations of next-generation family firm leaders to work in the family business. Hypothesis 10b. Intergenerational Authority positively influences the controlled (non-self-determined) motivations of next-generation family firm leaders to work in the family business. Hypothesis 11. A positive family climate positively influences the degree to which next-generation family firm leaders accept responsibility and are held accountable for their decisions and actions in the family business. Hypothesis 12. Intergenerational Authority negatively influences the degree to which next-generation family firm leaders accept responsibility and are held accountable for their decisions and actions in the family business. Hypothesis 13a. A positive family climate positively influences the organizational climate of the family business owned by that family. Hypothesis 13b. Intergenerational Authority negatively influences the organizational climate of the family business owned by that family. 122

147 Intentional Change Theory and Family Business Climate Intentional Change Theory (ICT) explains the process of sustained desired change for individuals and groups (Boyatzis, 2008), so it is fundamental to our thinking about how next-generation leaders learn leadership skills. ICT identifies five non-linear and often discontinuous experiences or discoveries that emerge in the change process (Boyatzis, 2008). The first is envisioning a desired self, and describes the process of creating a dream for what one wants to become in the future (Boyatzis & Akrivou, 2006). The second discovery of ICT is the real self, which refers to the self others see. Discovering gaps between what one wants to become and how others perceive one to be is a powerful motivator for change (Boyatzis, 2008). The third emergence in ICT is developing a learning agenda to move from the real self to the ideal self (Boyatzis, 2008). ICT s fourth discovery is experimenting with new behaviors and then practicing them until they become second nature. Effort, persistence, and practice are critical in developing and exercising leadership skills (Boyatzis, 2008). Ericsson & Charness (1994) draw an interesting parallel between the development of effective leaders and the development of world-class adult violin performers, who honed their skills through many years of consistent training and practice that began early in life. Child prodigies who did not follow a disciplined practice regimen fell behind those who did, most of whom did not show as much promise as young children. Practicing often involves trying something new, failing, then trying again until success is achieved, so a safe environment in which to practice is needed (Kolb & Boyatzis, 1970). The fifth emergence in ICT is forming trusting relationships with others who support the desired change effort by providing feedback, support, and permission for 123

148 change. (Boyatzis, 2008). Leadership development is much more likely to occur in an organization that supports and rewards efforts to make changes and learn new leadership skills (Cherniss & Adler, 2000). It is important to distinguish between relationships that help foster and sustain change and relationships that retard change, as existing reference groups sometimes desire that a person not change (Ballou et al., 1999). Because a supportive environment is so critical to learning new leadership behavior, we expected the climate of the family business organization itself to mediate the relationships between the constructs in our conceptual model expected to affect the leadership effectiveness and work engagement of the next generation leaders in our study. Hypothesis 14a. Family Business Climate mediates the relationships between the emotional and social intelligence competencies of next-generation family firm leaders and their leadership effectiveness and engagement with work. Hypothesis 14b. Family Business Climate mediates the relationships between the motivations of next-generation family leaders for working in the family business and their leadership effectiveness and engagement with work. Hypothesis 14c. Family Business Climate mediates the relationships of the degree to which next-generation family firm leaders accept responsibility and are held accountable for their decisions and actions in the family business and their leadership effectiveness and engagement with work. Our conceptual research model is depicted in Figure 16, and reflects our theoretical framework and the findings of our earlier qualitative study on leadership talent of next generation leaders. 124

149 Figure 16. Next-Generation Leadership Effectiveness and Work Engagement Conceptual Model 125

150 Research Design and Methods Multi-Rater Cross Sectional Design To determine the factors that influence a next-generation leader s leadership effectiveness and engagement with work we designed a quantitative survey designed to capture the perceptions of a cross section of family and non-family members in each family business that participated in our study. Next-generation family business leaders were defined as leaders at any management level and of any age, who are members of any generation of the business-owning family other than the generation that founded the business. Each next-generation leader who participated in the study filled out a survey and asked three to seven people familiar with his/her leadership practices to fill out a similar survey. The online survey utilized Qualtrics, a popular online survey research platform, and each participant was directed to one of three combinations of questions determined by their classification as a next-generation leader, other family member working in the family business, or a non-family leader or employee in the family business. Qualifying questions at the beginning of the survey shown in Appendix F ensured that each participant was directed to the correct set of questions. If someone logged on to the survey site and indicated that they were not associated with a family business, the survey was immediately terminated and no further responses were recorded. Next-generation leaders in each firm answered questions about their own leadership behaviors that reflect emotional and social intelligence competencies, their motivations for working in the family businesses, the climate of the business-owning family, the organizational climate of the family business itself, and the nature of their engagement with their work in the family firm. Other family members and non-family 126

151 members working in the family firm (the multi-raters ) answered the same set of questions about the next-generation leader s leadership behaviors that reflect emotional and social intelligence competencies and the organizational climate of the family business. In addition, the multi-raters answered questions about the degree to which the next-generation leader they were evaluating accepts responsibility and is held accountable for his/her actions and decisions in the family business, as well as their evaluation of the next-generation leader s leadership effectiveness. Multi-raters who were members of the business-owning family also responded to the same set of questions about family climate that the next-generation leaders answered. The multi-rater, 360-degreee feature is a key element of our study design and was included to increase the accuracy of results and avoid common method bias. Emotional and social intelligence (ESI) is one of the key independent variables in our conceptual model and it is well known that there is often a meaningful difference between self and other ratings on the Emotional and Social Intelligence Competence Inventory, the instrument we used to measure ESI. Consequently, self-ratings alone do not provide valid and reliable measures of ESI for research purposes (Wolff, 2005). In addition, using different sources to assess key measures as we have done in our study is the best ex ante procedure to avoid potential common method variance (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). Measurement Development We searched the literature to find previously validated scales to operationalize the key constructs in our study. In most cases, we used the scales as we found them with a few slight modifications in wording to reflect a family business context. We added five 127

152 questions to the responsibility scale to further explore findings from our qualitative study that suggested next-generation leaders in family firms are sometimes shielded from the consequences of their actions and decisions and not held accountable to the same extent as non-family leaders. As it turned out, an exploratory factor analysis of our data revealed that three of the questions we added form an independent scale, a finding we consider a meaningful contribution of our study. Scales used to measure the constructs in our study are as follows (also see the summary in Appendix E). Emotional and Social Intelligence Emotional and social intelligence, the extent to which the next-generation leader exhibits self-awareness, self-management, social awareness, and relationship management skills, was measured using 44 items from the Emotional and Social Competency Inventory University Edition (Boyatzis & Goleman). This inventory is a well-established instrument for measuring emotional and social intelligence developed by two of the pioneers of emotional and social intelligence, Richard Boyatzis and Daniel Goleman, and has been validated in multiple contexts. We included measures for nine dimensions of ESI (sample items in parentheses): (1) Achievement orientation, the extent to which the leader exhibits initiative, establishes and pursues challenging goals, and seeks to improve organizational and personal performance ( Seeks ways to do things better. ); (2) Adaptability, the extent to which the leader exhibits flexibility in his/her leadership behavior in pursing goals and implementing strategies in the face of changing priorities and/or rapid change ( Adapts to shifting priorities and rapid change. ); (3) Coach and mentor, the extent to which the leader coaches and mentors others by investing time and effort in their development ( Personally invests time and effort in 128

153 developing others. ); (4) Empathy, the extent to which the leader demonstrates an understanding of others perspectives, listens attentively, and puts himself/herself in the other person s shoes ( Understands others by putting self into others shoes. ); (5) Inspirational leadership, the extent to which the leader inspires and brings out the best in others, articulates a compelling vision, and creates a positive emotional tone ( Leads others by creating a positive emotional tone. ); (6) Organizational awareness, the extent to which the leader understands the values and culture of a team or organization and the informal processes by which work gets done ( Understands social networks. ); (7) Pattern recognition, the extent to which a leader perceives patterns or themes in events and uses metaphors or analogies to describe them ( Uses metaphors or analogies to describe themes or patterns. ); (8) Systems thinking, the extent to which the leader sees cause and effect relationships and how they interact ( Sees a situation as multiple cause and effect interactions. ); and (9) Teamwork, the extent to which the leader encourages participation of all team members, encourages cooperation, solicits input, and is supportive and respectful of team members ( Works well in teams by being supportive. ). Emotional and social intelligence behaviors were measured with a fivepoint Likert-type scale ranging from never shown to consistently shown with a sixth option, don t know, indicating the respondent had not had the opportunity to observe a specific behavior. Family Climate Family climate, the nature of family relationships and whole family functioning, was measured using 32 items from the Family Climate Scales (Björnberg & Nicholson, 2012). We chose this scale as it was specifically designed to measure family climate in a 129

154 family business context. We measured four dimensions of family climate: (1) Open communication, the degree to which the family openly and frankly communicates; including listening, showing interest in each other s opinions, and dealing forthrightly with issues of concern; (2) Intergenerational authority, the degree to which the senior generation sets the parameters of family conduct, including exercising power, setting the rules, and allowing the younger generation to participate in decision making; (3) Intergenerational attention, the degree to which the senior generation takes an interest in the activities and shows an active concern for the welfare of the younger generation, including being supportive of the younger generations goals; and (4) Cognitive cohesion, the degree to which family members share norms and values, including attitudes, interests, and beliefs. Because intergenerational authority is orthogonal to the other subscales, we modeled it as a separate family climate construct (Björnberg & Nicholson, 2007). Family climate items were measured with a five-point Likert-type scale ranging from strongly disagree to strongly agree. Family Business Climate Family business climate, the culture of the family business organization, was measure using 20 items from the Positive and Negative Emotional Attractor (PNEA) scale (Boyatzis, 2008). The PNEA measures three dimensions of business climate: (1) Vision, the degree to which management has articulated a clear, inspiring vision for the future of the business that builds on the organization s strengths; (2) Compassion, the degree to which the members of the organization trust and care about each other; and (3) Overall positive mood, the degree to which members of the organization enjoy working 130

155 in the business and think it is a great place to work. PNEA items were measured on a five-point Likert-type scale ranging from strongly disagree to strongly agree. Leadership Effectiveness Leadership effectiveness, the extent to which the next-generation leader is perceived to be effective, was measured using five items from the Leadership Effectiveness scale (Denison, Hooijberg, & Quinn, 1995). We adapted the scale slightly by substituting the word leader for the word manager in several of the items. Leadership effectiveness was measured using a five-point scale with different labeling for the extremes of each item measure. Performance standards were measured on a scale with extremes of below most standards and above most standards. Comparison to peers was measured on a scale with extremes of worse leader than peers and better leader than peers. Performance as a role model was measured on a scale with extremes of poor role model and excellent role model. Overall leadership success was measured on a scale with extremes of a leadership failure and a leadership success. Overall effectiveness as a manager was measured on a scale with extremes of ineffective leader and effective leader. Motivation to Work in the Family Business Our task in finding a suitable measure for motivation was not to identify a single measure of motivation, but rather to determine the nature of the next-generation leader s motivation for working in the family firm. We used 11 items from the Motivation to Work in the Family Business Scale, an unpublished scale adapted from the Motivation at Work Scale (Gagné et al., 2010) by Marylène Gagné for use in her research on family business successors and used with her permission. In addition, we used nine items from 131

156 the Multidimensional Work Motivation Scale (Gagné et al., 2013), an unpublished scale adapted from the Motivation to Work Scale. These items measure five dimensions of motivation to work: (1) Extrinsic regulation material, behavior driven by the desire for monetary rewards; (2) Extrinsic social, behavior driven by the desire for praise or the avoidance of criticism from others; (3) Introjected regulation, behavior driven by selfworth contingencies like ego-involvement and guilt; (4) Identified regulation, engaging in an activity because of its value or meaning to the next-generation leader; and (5) Intrinsic motivation, behavior driven by the positive experience of engaging in an activity for its own sake. Each of these motivations was modeled as a separate construct in our conceptual model. Motivation items were measured using a five-point Likert-type scale ranging from strongly disagree to strongly agree. Responsibility and Accountability Responsibility and accountability, the degree to which the next-generation leader accepts responsibility and is held accountable for his/her actions and decisions, was measure using 15 items, ten from The Responsibility Scale (Wood & Winston, 2007), and five we added to reflect findings from our qualitative study that suggested that nextgeneration family members are sometimes shielded from the consequences of their actions and decisions or not held accountable to the same extent as non-family leaders. Responsibility and accountability items were measured using a five-point Likert-type scale ranging from strongly disagree to strongly agree. Work Engagement Work engagement, a positive, fulfilling, work-related state of mind that is the positive opposite of burnout, was measure using the nine-item version of the Utrecht 132

157 Work Engagement Scale (Seppälä et al., 2009). The Utrecht Work Engagement Scale measures three dimensions of work engagement: (1) Vigor, the degree to which the nextgeneration leader invests energy, effort, and persistence in their work; (2) Dedication, the extent to which the next-generation leader experiences a sense of significance, enthusiasm, inspiration, pride, and challenge in their work; and (3) Absorption, the degree to which the next-generation leader fully concentrates on and becomes deeply engrossed in their work. Work engagement items were measured using a five-point Likert-type scale ranging from never to consistently. Pre-Testing Q-sort We tested questions from the scales we selected using a Q-sort technique following guidelines suggested by Thomas and Watson (2002) to see if those who participated in the Q-sort would group the items in the ways suggested by the scale authors. Q-sort is a powerful and well established technique for quantitatively evaluating opinions and attitudes (Thomas & Watson, 2002). It is particularly helpful in determining if latent constructs used in a quantitative research study are likely to demonstrate convergent and discriminant validity in post-data collection analysis. Our Q-sort results showed some cross-loading of a few items on the cognitive dimensions of emotional and social intelligence (pattern recognition and systems thinking), and on the intergenerational attention and intergenerational authority sub-scales of The Family Climate Scales, but they were minor and did not justify changing or eliminating items or making other changes to the scales. On the other hand, three items from the extrinsic sub-scale of the Motivation to Work in the family Business Scale were clearly grouped 133

158 separately from the others by the Q-sort participants. As a result, we separated the extrinsic scale into two scales, extrinsic-material and extrinsic-social, following the procedure introduced by the authors of the unpublished Multidimensional Work Motivation Scale (Gagné et al., 2013), an adaptation of the earlier Motivation at Work Scale (Gagné et al., 2010). Online Pre-Test of Questionnaire Following the Q-sort, we developed our questionnaire and secured approval from the Case Western Reserve University Institutional Review Board to proceed with our study. Next, we loaded our questions onto the Qualtrics online platform and used skiplevel logic to ensure that the correct set of questions would be presented to each category of survey respondent. We also programmed the software so that each next-generation leader who participated in the study could provide addresses for five to seven multi-raters familiar with their leadership practices. The Qualtrics software assigned a unique anonymous code to each potential multi-rater so that their responses could be automatically matched with the next-generation leader they were evaluating. The primary researcher sent invitations to each potential multi-rater with a link to the online survey and instructions that included an assurance that all responses were strictly confidential and that only de-identified aggregate data would be reported in the study. The primary researcher then tested a pilot version of the online questionnaire with a group of 20 BSBA and MBA students from family businesses enrolled in his family business class. The test suggested the need for minor wording changes in a few of the questions to provide greater clarity. A second test was conducted with several business leaders which revealed some minor programming issues with the procedure used to 134

159 match multi-raters with the correct next-generation leaders and the need to redesign the measurement scale for one set of questions. Those changes were made and the final questionnaire was ready to launch. Data Collection and Sample Data was collected over a four-month period from mid-september 2013 to mid- January Participants for our research were recruited through the primary researcher s personal network of privately-owned family business owners, family business consultants, university-based family business centers, business trade organizations with privately owned family business members, and businesses which provide services to family firms. invitations were sent to potential participants either directly from the primary researcher or through the individuals and organizations who agreed to help publicize the research project. Some of the organizations who publicized the study provided information on the numbers of invitations sent and some did not disclose that information to protect the privacy of their distribution lists. Invitations sent to members of the primary researcher s personal network and to the lists of the organizations that provided the numbers of invitations sent totaled 4,779. We estimate that another 1,100 invitations were sent to the lists of organizations that did not provide exact numbers. In addition, the primary researcher sent 3,658 invitations directly to multi-raters whose addresses were provided by next-generation leaders who participated in the study, for a total of approximately 9,537 invitations to participate. 866 people responded to the survey for an approximate response rate of 9.1%. After removing unfinished surveys, we received 586 usable surveys. We examined the data and removed 19 completed surveys that had more than 135

160 15% don t know answers and/or other missing data (Hair Jr, Hult, Ringle, & Sarstedt, 2013), for a total sample size of 567. The sample included 185 next-generation leaders and 382 multi-raters, 80 of whom were other family members working in the family business and 302 of whom were non-family leaders or employees working in the family firm. A summary of sample characteristics for individual respondents is shown in Table 7. We used the full sample to conduct exploratory and confirmatory factor analyses to establish the reliability and validity of the scales used and model fit for each of the constructs in our measurement model. We used the matched sample, which only included data for nextgeneration leaders for whom we also received responses from at least two multi-raters, to evaluate our structural model and test our hypotheses. For the 100 next-generation leaders in the matched sample, we received an average of 3.5 responses from multi-raters. Sample characteristics for the family firms represented in the survey are shown in Table 8. There were no meaningful differences in the characteristics of the multi-raters in the full and matched samples. The next-generation leaders in the matched sample were somewhat older than those in the full sample with 31% of the next-generation leaders in the matched sample in the age category vs. 22% in the full sample. The matched sample had more even distribution across age categories. There were also more CEOs in our matched sample (51% of respondents) than in the full sample (41% of respondents), which likely reflects the difference in age. In both samples, the vast majority of nextgeneration leader respondents were in senior-level management positions (85% for the matched sample and 78% for the full sample), suggesting that they have a major influence on the family and business climates in their organizations, key constructs in our 136

161 theoretical model. Virtually all of the family businesses represented in both samples were privately owned. The firms in the matched sample were slightly larger as measured by annual revenue, but the differences in size categories were quite small. We followed the approach recommended by Armstrong & Overton (1977b) to assess the possibility of non-response bias in our sample by comparing the responses of late responders with earlier responders. The procedure assumes that late responders are more likely to be representative of non-responders than those who respond earlier. We compared the item responses of the last 10% of survey participants to all other respondents by conducting a two-tailed t-test in Microsoft Excel. There were significant differences for only 14 of 209 item responses (6.7%) in the two groups, suggesting that non-response bias does not represent a threat for our sample. 137

162 Table 7. Respondent Sample Characteristics Full Sample Matched Sample Respondent Characteristics NGLs MRs NGLs MRs Number Percent Number Percent Number Percent Number Percent Sample size (n) Gender Male % % % % Female 33 18% 99 26% 19 19% 88 25% Missing 0 0% 3 1% 0 0% 3 1% Age % 14 4% 1 1% 11 3% % 60 16% 28 28% 55 16% % 92 24% 23 23% 84 24% % % 31 31% 97 28% % 90 24% 17 17% 84 24% % 21 5% 0 0% 16 5% Missing 0 0% 3 1% 0 0% 3 1% Generation G1 0 0% 0 0% G % 41 41% G % 32 32% G % 17 17% G % 8 8% Missing 8 4% 2 2% Education Less than high school 0 0% 0 0% 0 0% 0 0% High school/ged 4 2% 29 8% 2 2% 27 8% Some college 11 6% 59 15% 6 6% 53 15% 2-year college degree 7 4% 31 8% 2 2% 28 8% 4-year college degree % % 58 58% % Masters degree 44 24% 86 23% 27 27% 77 22% Doctoral degree (PhD, EdD) 3 2% 1 0% 2 2% 0 0% Professional degree (JD, MD) 6 3% 11 3% 3 3% 11 3% Missing 0 0% 0 0% 0 0% 0 0% Position in Family Business CEO 76 41% 23 6% 51 51% 17 5% Other senior-level management 69 37% % 34 34% % Middle-level management 24 13% 92 24% 10 10% 86 25% Entry-level management 10 5% 19 5% 5 5% 16 5% Non-management position 5 3% 45 12% 0 0% 39 11% Missing 1 1% 2 1% 0 0% 2 1% Family Membership Family member 75 20% 61 17% Non-family member % % Missing 1 0% 1 0% NGL Relationship Immediate supervisor 25 7% 22 6% Senior leader 41 11% 36 10% Direct report % % Other follower 52 14% 45 13% Peer 48 13% 44 13% Other relationship 57 15% 51 15% Missing 8 2% 8 2% Note: NGL = Next-generation family leader; MR = Multi-rater 138

163 Table 8. Family Business Sample Characteristics Family Business Characteristics Sample Size (n) Revenue Full Sample Matched Sample Under $25 million 59 32% 29 29% $25 - $50 million 24 13% 9 9% $51 - $100 million 21 11% 15 15% $101 - $250 million 45 24% 26 26% $251 - $500 million 15 8% 9 9% $500 million % 11 11% Missing 2 1% 1 1% Ownership Privately owned % 99 99% Public, but family controlled 2 1% 0 0% Public 0 0% 0 0% Other form of ownership 2 1% 1 1% Missing 0 0% 0 0% Data Analysis A detailed explanation of our data analysis procedures follows. See Figure 17 for a flow chart of our process for the base case. 139

164 Figure 17. Data Analysis Flow Chart Base Case Data Screening We screened the data and found only one variable with more than 10% missing data, which we removed from the data set. Total missing data for all variables was only 140

165 1.4%. We imputed missing values using the mean replacement method. Since we used Likert-type scales, we did not remove outliers. We tested for skewness, kurtosis, linearity, and homoscedasticity. We found that all variables exhibited homoscedasticity. However, a number of variables exhibited skewness and/or kurtosis. Because our data set was sufficiently large to reduce the effects of skewness and kurtosis on results (Hair, Black, Babin, & Anderson, 2010), we did not transform data for the measurement model tests that follow. However, because our SEM model was based on aggregated results matched to each next-generation leader in the study that reduced our sample size for SEM analysis to 100, and because multivariate analysis assumes normality of data, we transformed the aggregated variables that demonstrated skewness and/or kurtosis by squaring or cubing negatively skewed variables, and by using the logarithm for one positively skewed variable (Hair et al., 2010). We ran the model in PLS with and without transformed variables and found little difference in the results except that the relationship between Responsibility and Leadership Effectiveness was somewhat stronger using the transformed variables. The results reported in the SEM analysis section of the paper are for the model using transformed variables. We also tested for linearity and found all relationships between aggregated variables to be linear in nature. Measurement Model Analysis We conducted exploratory (EFA) and confirmatory factor analyses (CFA) on the full data set using IBM SPSS Statistics Amos 21 software. We conducted these analyses separately for each category of respondents and the specific sets of questions they answered. SPSS does not allow for completely missing data, which would have been the case had we attempted to analyze the full data set and all items simultaneously, since 141

166 respondents answered different sets of questions based on their category classification. All EFAs were conducted using principal components analysis with Promax rotation, and all scales were judged to be reflective. We used principal components analysis (PCA) because our goal was data reduction for prediction purposes, as our data set was very large. PCA identifies the minimum number of factors necessary to account for the maximum amount of total variance in the variables (Hair et al., 2010). We used Promax rotation because it is an oblique rotation method that is more realistic than orthogonal rotation, as the underlying theoretical dimensions are not assumed to be uncorrelated (Hair et al., 2010). Results of the EFA and CFA analyses for each category of respondents and the constructs about which they answered questions follows: Family Business Climate (n=567) Family Business Climate questions were answered by all survey participants, so we used the full data set for this measurement model. Using Eigenvalues greater than one as our criteria for the EFA of Family Business Climate (FBC), the initial run of the data returned a very clean three-factor pattern matrix that explained 61% of the total variance. Communalities ranged from.353 to.803 with all items above the minimum acceptable threshold of.50 (Hair et al., 2010), except for cmp_1 (.471), cmp_3 (.403), cmp_5 (.433), and vsn_3 (.353). The Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.937 and the Bartlett's Test of Sphericity was significant (x² = , df = 190, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010), except for vsn_3 (.468), which was very close to the.50 threshold. With our 142

167 sample size of 567, a loading above.30 is statistically significant and acceptable for structure interpretation (Hair et al., 2010), so we retained vsn_3 for the confirmatory factor analysis. There were only four cross-loadings and they all differed from the value of the loading on the primary factor by more than.20, indicating sufficient discriminant validity. Cronbach s Alphas were all well above the.70 threshold recommended by Hair et al. (2010). See Table 9 for a summary of EFA results for the Family Business Climate construct. Table 9. Family Business Climate EFA Measurement Model Results (n = 567) Factor/Construct No. of Items Loadings Cronbach s Alpha Compassion 6.784,.765,.559,.723,.602, Overall Positive Mood 6.735,.878,.833,.791,.866, Vision 8.913,.730,.468,.774,.696, ,.824,.715 Family Business Climate (all three factors) 20 See above..93 Next, we conducted a confirmatory factor analysis (CFA) in AMOS for Family Business Climate using information from the EFA. We consulted the modification indices and co-varied error terms for items that loaded on the same factor and were theoretically related when it improved model fit to do so (Byrne, 2010). We removed cmp_1 (lowest loading at.46 and low communality <.50 at.471), cmp_5 (low loading at.47 and communality <.50 at.433, and cmp_3 (low loading at.56), and achieved very good model fit with CMIN/DF = 2.493, GFI =.948, CFI =.973, RMSEA =.051, and PCLOSE =.373 (see Table 10 for a summary of CFA results). 143

168 We tested for convergent validity of the factors that comprise the Family Business Climate construct using three tests recommended by Fornell and Larker (1981): item reliability, composite reliability, and average variance extracted. After removing the items detailed above, all remaining items demonstrated standardized loadings on their respective factors greater than.50, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the three factors was greater than.70, indicating internal consistency (Hair et al., 2010). Average variance extracted (AVE) for each of the three factors was greater than.50, the minimum threshold recommend by Hair et al. (2010), indicating that the variance captured by the factor is greater than variance due to measurement error. Discriminant validity is demonstrated when the variance shared between a construct and any other construct in a structural equation model (SEM) is less than the variance shared between the construct and its measures (Fornell, Tellis, & Zinkhan, 1982). Discriminant validity is assessed by comparing the square root of a construct s average variance extracted with that construct s correlations with the other constructs in the model. If the square root of the AVE is greater than the correlations with other constructs in the model (the off-diagonals in a correlation matrix), then discriminant validity is demonstrated (Fornell & Larcker, 1981; Hair et al., 2010). Our test using this criterion demonstrated the discriminant validity of the three factors that comprise Family Business Climate. A summary of our test results and the correlation matrix are shown in Table 10. The square root of the AVEs is entered on the diagonals. For all constructs, AVE is greater than the maximum shared variance (MSV) with any other construct as well as the average shared variance (ASV) with all the other constructs in the model. 144

169 Finally, we tested for common method bias by adding a common latent factor to the model and comparing standardized regression weights of factor loadings with and without the common latent factor (Podsakoff et al., 2003). Differences in factor loadings in the models with and without the common latent factor were all significantly less than.20, indicating the lack of meaningful common method bias. Results of our test are shown in Appendix G. A summary of CFA results is shown in Table 10. Our final CFA measurement model for Family Business Climate is shown in Appendix H. 145

170 Table 10. Family Business Climate CFA Measurement Model Results (n = 567) Constructs/Items Mean Standard Deviation Standardized Regression Weights Cronbach's Alpha Composite Reliability Average Maximum Variance Shared Extracted Variance Average Shared Variance Criteria >.50 >.70 >.70 >.50 < AVE < AVE Family Business Climate 0.93 Compassion cmp_2_ cmp_4_ cmp_6_ Overall Positive Mood opm_1_ opm_2_ opm_3_ opm_4_ opm_5_ opm_6_ Vision vsn_1_ vsn_2_ vsn_3_ vsn_4_ vsn_5_ vsn_6_ vsn_7_ vsn_8_ Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom CMIN/DF GFI CFI RMSEA PCLOSE < 3.0 >.90 >.92 <.07 > Carmines & McIver (1981) Hair et al. (2010:649) Hair et al. (2010:654) Hair et al. (2010:654) Correlations Matrix CR AVE MSV ASV Mood Vision COMP Mood Vision COMP Note: Square root of AVEs on the diagonals. Emotional and Social Intelligence (n = 382) We conducted EFA and CFA analyses for Emotional and Social Intelligence (ESI) using responses from multi-raters only as explained in the study design section of 146

171 our paper. Using Eigenvalues greater than one as our criteria for the factor analysis, eight runs of the data returned a five-factor pattern matrix that explained 65% of the total variance. To achieve satisfactory results, we removed ao_4, ao_5, ad_4, cm_4, oa_1, and st_4 due to commonalities below.50 and ao_3, cm_1, emp_2, emp_4, emp_5, il_1, il_3, il_4, st_1, and st_3 due to cross-loadings on two or more factors with differences of less than.20. We had expected a nine-factor structure, as shown in Appendix F. We think this suggests that ESI competencies may be judged differently in a family business context. In our study, two of the items measuring Empathy (understanding others by putting self into others shoes and listening attentively) and two of the items measuring Inspirational Leadership (leading by building pride in the group and creating a positive emotional tone) loaded on the same factor as the items measuring Teamwork. Perhaps in a family business setting, leaders are considered to be skilled at fostering teamwork when they also demonstrate an ability to understand others in an empathetic way and inspire others by creating an overall positive climate in the organization. We labeled this factor Positive Empathetic Team Leadership (PETL). Four of the five items measuring Adaptability (adapting overall strategy goals or projects to fit the situation, adapting overall strategy goals or projects to cope with unexpected events, adapts by smoothly juggling multiple demands, and adapts to shifting priorities and rapid change), two of the items measuring Achievement Orientation (initiate s actions to improve and seeks ways to do things better), two of the items measuring Pattern Recognition (perceives patterns or trends in seemingly random information and perceives themes or patterns in events), and one of the items measuring Systems Thinking (sees a situation as multiple cause and effect interactions) all loaded on the same factor. This result suggests that in the family 147

172 firms included in our study, the leader s ability to see the big picture and adapt and implement strategies to address the changing nature of a complex environment appear to be related. We labeled this factor Adaptive Strategic Leadership (ASL). Four of the five items measuring Organizational Awareness (OA) loaded strongly on the same factor as expected. Three of the five items measuring Coach and Mentor (CM) loaded strongly on the same factor as expected. Two of the items measuring Pattern Recognition (uses metaphors or analogies to describe themes or patterns and interprets a new situation by using an analogy relating it to a different type of situation) loaded strongly on the same factor as expected, but as detailed above, two of the other items measuring Pattern Recognition loaded on ASL. We labeled this fifth factor Analogical Reasoning, (AR). For the items included in our final EFA, communalities ranged from.504 to.781 with all items above the minimum acceptable threshold of.50 recommended by Hair et al. (2010). The Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.951 and the Bartlett's Test of Sphericity was significant (x² = , df = 378, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010), except for pr_2, which cross-loaded on Adaptive Strategic Leadership and Analogical Reasoning. We retained pr_2 for the confirmatory factor analysis as removing at this stage would have left only two items to measure Analogical Reasoning, less than the three items recommended by Hair et al. (2010). There were eight other cross-loadings and they all differed from the value of the loading on the primary factor by more than.20, indicating sufficient discriminant validity. Cronbach s Alphas were all well above the.70 threshold 148

173 recommended by Hair et al.(2010). See Table 11 for a summary of EFA results for the Emotional and Social Intelligence construct. Table 11. Emotional and Social Intelligence EFA Measurement Model Results (n = 382) Factor/Construct No. of Items Loadings Cronbach s Alpha Positive Empathetic Team 9.627,.767,.567,.781,.756,.93 Leadership.764,.839,.743,.975 Adaptive Strategic 9.753,.566,.559,.769,.590,.90 Leadership.605,.922,.730,.631 Organizational Awareness 4.746,.783,.683, Coach and Mentor 3.718,.695, Analogical Reasoning 3.881,.359, Emotional and Social Intelligence (all five factors) 28 See above..95 Next, we conducted a CFA in AMOS for Emotional and Social Intelligence using information from the EFA. We consulted the modification indices and co-varied error terms for items that loaded on the same factor and were theoretically related when it improved model fit to do so (Byrne, 2010). We removed pr_2 to improve model fit. After removing pr_2, the model was still over-identified with just two strong indicators for AR (pr_2 =.72 and pr_3 =.92). We removed pr_4 and ao_1 to improve the validity of ASL. The remaining items loaded strongly on their respective factors with all above.60 and most above.70, except for oa_3 (.49) which was very close to the minimum threshold of.50 recommended by Hair et al. (2010). Very good model fit was achieved with CMIN/DF = 1.700, GFI =.914, CFI =.968, RMSEA =.043, and PCLOSE =.958 (see Table 12 for a summary of CFA results). We tested for convergent validity of the factors that comprise the ESI construct using three tests recommended by Fornell and Larker (1981): item reliability, composite 149

174 reliability, and average variance extracted. After removing the items detailed above, all remaining items demonstrated standardized loadings on their respective factors greater than.50 except for oa_3, as noted above, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the five factors was greater than.70, indicating internal consistency (Hair et al., 2010). Average variance extracted (AVE) for each of the five factors was equal to or greater than.50, the minimum threshold recommend by Hair et al. (2010), indicating that the variance captured by the factor is greater than variance due to measurement error. We did not conduct a separate discriminant validity test because it is not an appropriate test for the ESI scales, given ESI s theoretical basis and origin of item construction. The ESI scales were created from inductive studies of behavior anchored to performance criteria which resulted in a circumplex model of competencies. Consequently, it is assumed that some items as well as scales will have a high shared variance with others (Boyatzis, Gaskin, & Wei, 2013). 150

175 Table 12. Emotional and Social Intelligence CFA Measurement Model Results (n = 382) Constructs/Items Mean Standard Deviation Standardized Regression Weights Cronbach's Alpha Composite Reliability Average Variance Extracted Criteria >.50 >.70 >.70 >.50 Emotional and Social Intelligence 0.95 Positive Empathetic Team Leadership emp_1_ emp_3_ il_2_ il_5_ tw_1_ tw_2_ tw_3_ tw_4_ tw_5_ Adaptive Strategic Leadership ad_1_ ad_2_ ad_3_ ad_5_ ao_2_ pr_5_ st_2_ Organizational Awareness oa_2_ oa_3_ oa_4_ oa_5_ Coach and Mentor cm_2_ cm_3_ cm_5_ Analogical Reasoning pr_1_ pr_3_ Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 259 CMIN/DF < GFI > CFI > RMSEA (LO 90 - HI 90) < PCLOSE > Carmines & McIver (1981) Hair et al. (2010:649) Hair et al. (2010:654) Hair et al. (2010:654) 151

176 Responsibility, Accountability, and Leadership Effectiveness (n=382) We conducted EFA and CFA analyses for Responsibility and Accountability and Leadership Effectiveness using responses from multi-raters only as explained in the study design section of our paper. Using Eigenvalues greater than one as our criteria for the factor analysis, two runs of the data returned a very clean four-factor pattern matrix that explained 69% of the total variance. All five Leadership Effectiveness items loaded strongly on the same factor as expected. We removed ra_3 as it loaded on Leadership Effectiveness instead of on Responsibility and Accountability and ra_8 as it cross-loaded on another factor with a difference in loadings less than.20. As discussed earlier in our paper, we used ten items from an existing scale (Wood & Winston, 2007) and added five of our own to measure Responsibility and Accountability. Interestingly, eight of the ten items from the Wood & Winston scale loaded on the same factor as expected, but three of our items (has held positions within the family firm with real responsibility and accountability, has been held accountable for his/her decisions and actions in the family business, and is often shielded from the consequences of his/her actions - a reverse coded item) loaded on a second factor and two (receives accurate feedback on his/her performance and is held to the same standards as non-family employees) loaded on a third. We added these five items to reflect findings from our qualitative study that suggested that family leaders are sometimes shielded from risks and the consequences of their own actions and decisions and not held to the same standard of accountability as non-family leaders. Our results suggest that these concepts are distinct from general responsibility and may be unique to family firms, thus making a meaningful contribution to family business research. We labeled the three-item factor Accountability to 152

177 distinguish it from the Wood & Winston scale, which we labeled Responsibility. We labeled the two-item factor Performance Evaluation. For the items included in our final EFA, communalities ranged from.481 to.828 with all items above the minimum acceptable threshold of.50 recommended by Hair et al.(2010), except ra_1 (.481) which was very close to the.50 threshold. The Kaiser- Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.942 and the Bartlett's Test of Sphericity was significant (x² = , df = 153, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010). There were four cross-loadings and they all differed from the value of the loading on the primary factor by more than.20, indicating sufficient discriminant validity. Cronbach s Alphas were at or above the.70 threshold recommended by Hair et al. (2010) except for Performance Evaluation (.63), so we eliminated that factor from our model. See Table 13 for a summary of EFA results for the Leadership Effectiveness, Responsibility, Accountability, and Performance Evaluation constructs. Table 13. Leadership Effectiveness, Responsibility, Accountability, and Performance Evaluation EFA Measurement Model Results (n = 382) Factor/Construct No. of Items Loadings Cronbach s Alpha Leadership Effectiveness 5.913,.924,.756,.865, Responsibility 8.561,.700,.548,.811,.895, ,.723,.603 Accountability 3.904,.747, Performance Evaluation 2.94,

178 Next, we conducted a CFA in AMOS for all of the items answered by the multiraters only (n=382) using our EFA and CFA results for Emotional and Social Intelligence; and our EFA results for Leadership Effectiveness, Responsibility, and Accountability. We consulted the modification indices and co-varied error terms for items that loaded on the same factor and were theoretically related when it improved model fit to do so (Byrne, 2010). Good model fit was achieved with CMIN/DF = 1.706, CFI =.950, RMSEA =.043, and PCLOSE =.998 (see Table 14 for a summary of CFA results). We tested for convergent validity of the factors that comprise ESI; and the Leadership Effectiveness, Responsibility, and Accountability constructs using three tests recommended by Fornell and Larker (1981): item reliability, composite reliability, and average variance extracted. All items demonstrated standardized loadings on their respective factors greater than.50 except for oa_3 (.493), which was very close to the.50 threshold, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the eight factors was greater than.70, indicating internal consistency (Hair et al., 2010). Average variance extracted (AVE) for each of the eight factors was equal to or greater than.50, the minimum threshold recommend by Hair et al.(2010), indicating that the variance captured by the factor is greater than variance due to measurement error. As explained above, we did not apply the Fornell and Larker (1981) test for discriminant validity to the ESI scales as ESI is a circumplex model, and it is assumed that some items as well as scales will have a high shared variance with others (Boyatzis, Gaskin, & Wei, 2013). We did test for discriminant validity using the Fornell Larker test for the other constructs in our multi-rater only measurement model. A summary of our test results and the correlation matrix are shown in Table 14. Discriminant validity is 154

179 demonstrated for Leadership Effectiveness (LEV) and Accountability (ACCT) constructs, as average shared variance (AVE) for both is greater than the maximum shared variance (MSV) with any other construct as well as the average shared variance (ASV) with all the other constructs in the model. The AVE for Responsibility (.750) is marginally less than its shared variance with Positive Empathetic Team Leadership (.751) and Leadership Effectiveness (.753), but the differences are so small that discriminant validity is judged sufficient for the Responsibility construct. In addition, an assessment of the face validity of Responsibility demonstrates that is a much different construct than either Positive Empathetic Team Leadership or Leadership Effectiveness. The questions survey respondents answered about next-generation leaders for responsibility were clearly related to the degree to which those leaders accept responsibility for their actions and decisions, while the questions that reflect Positive Empathetic Team Leadership indicate behaviors that indicate empathy for others and a leadership style characterized by an emphasis on teamwork, and the questions about leadership effectiveness reflect respondent evaluation of overall leader effectiveness and a comparison of leadership skills of next-generation leaders with their peers (see Appendix F). Finally, we tested for common method bias by adding a common latent factor to the model and comparing standardized regression weights of factor loadings with and without the common latent factor (Podsakoff et al., 2003). Differences in factor loadings in the models with and without the common latent factor were all significantly less than.20, indicating the lack of meaningful common method bias. Results of our test are shown in Appendix G. 155

180 A summary of CFA results for our multi-rater only model is shown in Table 14. The final CFA for our multi-rater only measurement model is shown in Appendix H. Table 14. Emotional and Social Intelligence, Leadership Effectiveness, Responsibility and Accountability CFA Multi-Rater Measurement Model Results (n = 382) Constructs/ Items Mean Standard Deviation Standardized Regression Weights Cronbach's Alpha Composite Reliability Average Variance Extracted Maximum Shared Variance Average Shared Variance Criteria >.50 >.70 >.70 >.50 < AVE < AVE Emotional and Social Intelligence 0.95 Positive Empathetic Team Leadership emp_1_ emp_3_ il_2_ il_5_ tw_1_ tw_2_ tw_3_ tw_4_ tw_5_ Adaptive Strategic Leadership ad_1_ ad_2_ ad_3_ ad_5_ ao_2_ pr_5_ st_2_ Organizational Awareness oa_2_ oa_3_ oa_4_ oa_5_ Coach and Mentor cm_2_ cm_3_ cm_5_ Analogical Reasoning pr_1_ pr_3_

181 Constructs /Items Table 14 (continued) Emotional and Social Intelligence, Leadership Effectiveness, Responsibility and Accountability CFA Multi-Rater Measurement Model Results (n = 382) Mean Standard Deviation Standardized Regression Weights Cronbach's Alpha Composite Reliability Average Variance Extracted Maximum Shared Variance Average Shared Variance Criteria >.50 >.70 >.70 >.50 < AVE < AVE Leadership Effectiveness lev_1_ lev_2_ lev_3_ lev_4_ lev_5_ Responsibility ra_1_ ra_2_ ra_4_ ra_5_ ra_6_ ra_7_ ra_9_ ra_10_ Accountability ra_11_ ra_12_ ra_13_ Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 738 CMIN/DF < Carmines & McIver (1981) GFI > Hair et al. (2010:649) CFI > Hair et al. (2010:654) RMSEA (LO 90 - HI 90) < Hair et al. (2010:654) PCLOSE >

182 Table 14 (continued) Emotional and Social Intelligence, Leadership Effectiveness, Responsibility and Accountability Correlations Matrix CR AVE MSV ASV RESP OA AR PETL CM ASL LEV ACCT RESP OA AR PETL CM ASL LEV ACCT Note: Square root of AVEs on the diagonals. Family Climate (n=265) We used responses from next-generation leaders and from multi-raters who were also members of the business-owning families represented in our study to measure Family Climate. Using Eigenvalues greater than one as our criteria for the EFA of Family Climate (FC), the data returned a six-factor solution, while a four-factor solution had been expected. iaut_5 and iaut_6 loaded separately from the other Intergenerational Authority items. iatt_3 and iatt_5 loaded separately from the other Intergenerational Attention items. We restricted the extraction to four factors in a second run of the data and achieved a very clean pattern matrix with no cross-loadings whose values differed from the loadings on the primary factors by less than.20. However, this solution only explained 53% of the total variance, below the threshold of 60% recommended by Hair et al. (2010). In subsequent runs of the data, we removed iaut_5, iaut_6, iatt_3, and iatt_5 since they loaded on separate factors in the first run; oc_5 (low communality of.342 and low loading of.375); iaut_8 (negative loading with the Intergenerational Attention items); iatt_4 (low communality of.377); and iaut_1 (low communality of.343). A sixth run of the data returned a very clean four-factor pattern matrix, consistent with the results expected, that explained 62% of the total variance. Communalities for the remaining 158

183 items ranged from.371 to.773 with all items above the minimum acceptable threshold of.50 (Hair et al., 2010), except for cogc_1 (.487), cogc_2 (.371), cogc_3 (.482), and cogc_6 (.499).. The Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.892 and the Bartlett's Test of Sphericity was significant (x² = , df = 276, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010). There was only one cross-loading and its value differed from the value of the loading on the primary factor by more than.20, indicating sufficient discriminant validity. Cronbach s Alphas were all well above the.70 threshold recommended by Hair et al. (2010). See Table 15 for a summary of EFA results for the Family Business Climate construct. Table 15. Family Climate EFA Measurement Model Results (n = 265) Factor/Construct No. of Items Loadings Cronbach s Alpha Cognitive Cohesion 8.647,.583,.724,.885,.776, ,.776,.705 Open Communication 7.863,.824,.881,.669,.512, ,.781 Intergenerational Attention 5.869,.881,.806,.842, Intergenerational Authority 4.742,.728,.793, Next, we conducted a confirmatory factor analysis (CFA) in AMOS for Family Climate using information from the EFA. We consulted the modification indices and covaried error terms for items that loaded on the same factor and were theoretically related when it improved model fit to do so (Byrne, 2010). The four factor model exhibited very good model fit with CMIN/DF = 1.901, GFI =.896, CFI =.950, RMSEA =.058, and PCLOSE =.074 (see Table 16 for a summary of CFA results). 159

184 We tested for convergent validity of the factors that comprise the Family Climate construct using three tests recommended by Fornell and Larker (1981): item reliability, composite reliability, and average variance extracted. After removing the items detailed above, all remaining items demonstrated standardized loadings on their respective factors greater than.50, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the four factors was greater than.70, indicating internal consistency (Hair et al., 2010). Average variance extracted (AVE) for each of the four factors was greater than.50, the minimum threshold recommend by Hair et al. (2010), indicating that the variance captured by the factor is greater than variance due to measurement error. Discriminant validity is demonstrated when the variance shared between a construct and any other construct in a structural equation model (SEM) is less than the variance shared between the construct and its measures (Fornell et al., 1982). Discriminant validity is assessed by comparing the square root of a construct s average variance extracted with that construct s correlations with the other constructs in the model. If the square root of the AVE is greater than the correlations with other constructs in the model (the off-diagonals in a correlation matrix), then discriminant validity is demonstrated (Fornell & Larcker, 1981; Hair et al., 2010). Our test using this criterion demonstrated the discriminant validity of the four factors that comprise Family Climate, as the AVE for each of the four factors was greater than the maximum shared variance (MSV) and average shared variance (ASV) with any of the other factors. A summary of our test results and the correlation matrix are shown in Table 16. Finally, we tested for common method bias by adding a common latent factor to the model and comparing standardized regression weights of factor loadings with and 160

185 without the common latent factor (Podsakoff et al., 2003). Differences in factor loadings in the models with and without the common latent factor were all significantly less than.20, indicating the lack of meaningful common method bias. Results of our test are shown in Appendix G. A summary of CFA results for Family Climate is shown in Table 16. Our final CFA measurement model for Family Climate is shown in Appendix H. 161

186 Table 16. Family Climate CFA Measurement Model Results (n = 265) Constructs /Items Mean Standard Deviation Standardized Regression Weights Cronbach's Alpha Composite Reliability Average Variance Extracted Maximum Shared Variance Average Shared Variance Criteria >.50 >.70 >.70 >.50 < AVE < AVE Family Climate 0.88 Cognitive Cohesion cogc_1_ cogc_2_ cogc_3_ cogc_4_ cogc_5_ cogc_6_ cogc_7_ cogc_8_ Open Communication oc_1_ oc_2_ oc_3_ oc_4_ oc_6_ oc_7_ oc_8_ Intergenerational Attention iatt_1_ iatt_2_ iatt_6_ iatt_7_ iatt_8_ Intergenerational Authority iaut_2_ iaut_3_ iaut_4_ iaut_7_ Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 175 CMIN/DF < Carmines & McIver (1981) GFI > Hair et al. (2010:649) CFI > Hair et al. (2010:654) RMSEA (LO 90 - HI 90) < Hair et al. (2010:654) PCLOSE > Correlations Matrix CR AVE MSV ASV CogC OC IATT IAUT CogC OC IATT IAUT Note: Square root of AVEs on the diagonals. 162

187 Utrecht Work Engagement and Motivation to Work in the Family Business (n = 185) Next-generation leaders (NGLs) answered questions about their own motivations for working in the family business and the degree to which they were engaged with their work, so only NGL data was used for this measurement model. Using Eigenvalues greater than one as our criteria for the factor analysis, twelve runs of the data returned a six-factor pattern matrix that explained 67% of the total variance. To achieve satisfactory results, we removed exs_1, exs_4 id_1, id_3, int_1, int_2, and int_3, due to crossloadings on two or more factors with differences of less than.20. Seven of the nine items measuring work engagement loaded on a well-defined factor, which we labeled Utrecht Work Engagement (UWE), the name of the scale from which the questions were derived. Two work engagement items (uwe_8 and uwe_9) loaded on a separate but weak factor, so we eliminated them from the model. exm_1, exm_2, and exm_3 loaded on the same factor, as expected, and we labeled this factor Extrinsic Material. exs_2 and exs_3 loaded on the same factor, which we labeled Extrinsic Social. id_2, inj_4 and int_4 all loaded on the same factor. It was not surprising that id_2 (because working for the family business aligns with my personal values) and int_4 (for the moments of joy working in this company brings me) as they belong to a larger group of identified regulation and intrinsic motivation items which the authors of the Motivation at Work scale we used to develop our survey indicate are often grouped together by researchers and labeled self-controlled or autonomous motivation (Gagné et al., 2010). However, it was not expected that inj_4 (working in the family business makes me feel proud of myself) would load on the same factor as the two items from the autonomous 163

188 group, as it is part of a larger group of introjected regulation motivation items that reflect behavior driven by self-worth contingencies like ego-involvement and guilt (Gagné et al., 2010). id_2 and inj_4 were modified from the original Motivation at Work Scale to reflect the family business context, which was the focus of this study. Just as with the loadings of some of the Emotional and Social Intelligence items, we think this result may be an artifact of how pride in where one works may be viewed differently if the respondent is a member of the business-owning family than it is if the respondent works for a public firm or a private company owned by others. Our result suggests that for the next-generation family leaders in our study, personal values, the joy derived from, and the pride experienced as a result of working in the family business are all related to the same concept, which we labeled Personal Purpose. inj_1, inj_2, and id_4 loaded on the same factor. inj_1 (I really want to succeed in this job and I would be ashamed otherwise) and inj_2 (this business is my life and I don t want to fail) are logically and theoretically related, and they are both part of the larger group of introjected regulation items. However, id_4 (this is the type of career I wanted, so I am achieving my life goal) was expected to load with other identified regulation items. It loaded less strongly (.522) than inj_1 (.724) or inj_2 (.812) on the same factor, cross-loaded on three other factors, and seemed theoretically unrelated to inj_1 and inj_2, so we were uncertain that this statistical result identified the best solution. We decided to keep id_4 grouped with inj_1 and inj_2 at this stage of the analysis, but to pay close attention to how it performed in the CFA. We labeled this factor Fear of Failure. inj_3 (I have to be a successful successor to my parent or other ancestor who founded the business) and inj_5 (I have to 164

189 prove to myself that I can do this job) are theoretically related and loaded on the same factor, which we labeled Succession Pressure. The six-factor solution suggested by the EFA resulted in a Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value of.795 and a significant Bartlett's Test of Sphericity (x² = , df = 190, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010). There were no cross-loadings whose values differed from the value of the loading on the primary factor by less than.20, indicating sufficient discriminant validity. Cronbach s Alphas for Utrecht Work Engagement (.885) and Personal Purpose (.708) met or exceeded the.70 threshold recommended by Hair et al. (2010). However, Cronbach s Alphas for Fear of Failure (.655), Extrinsic Motivation Material (.688), Extrinsic Regulation Social (.615) and Succession Pressure (.638) were below the.70 threshold, although not by much. We suspected that these lower-than-desired Cronbach s Alphas might be due to having only two or three indicators for these four factors. The authors of the Motivation at Work Scale (Gagné et al., 2010) indicate that researchers often combine identified regulation and intrinsic motivation items to create a selfdetermined or autonomous motivation factor; and the external and interjected regulation items to form a non-self-determined or controlled motivation factor. Since the nature of a next-generation leader s motivation to work in the family business was important to our theory, we decided to retain all four problematic factors for the CFA and experiment with second order factors comprised of some combination of Fear of Failure, Succession Pressure, Extrinsic Regulation Material, and External Regulation 165

190 Social. All four of these factors were primarily reflective of theoretically related extrinsic regulation and introjected regulation items, and we surmised that combining them into one or more higher order factors might result in acceptable reliability for the higher order factors. See Table 17 for a summary of EFA results for the Utrecht Work Engagement and Motivation to Work constructs. Table 17. Utrecht Work Engagement and Motivation to Work EFA Measurement Model Results (n = 185) Factor/Construct No. of Items Loadings Cronbach s Alpha Utrecht Work Engagement 7.872,.842,.857,.829,.670, ,.623 Personal Purpose 3.868,.734, Fear of Failure 3.522,.724, Extrinsic Regulation 3.863,.573, Material Extrinsic Regulation Social 2.817, Succession Pressure 2.640, Using our EFA results, we experimented with multiple iterations of the measurement model in the CFA to find an acceptable solution that balanced model fit with reliability and validity standards for the factors in the model. We consulted the modification indices and co-varied error terms for items that loaded on the same factor and were theoretically related when it improved model fit to do so (Byrne, 2010). We created a second-order factor, Introjected Regulation that was comprised of the Fear of Failure and Succession Pressure factors, which as we had surmised, solved the reliability issues for those two factors encountered in the EFA. Creating the second-order factor Introjected Regulation was theoretically justified as all four of the items comprising the two first-order factors are introjected regulation items from the original scale used to 166

191 create our survey. In the same way, we experimented with a second-order factor comprised of Extrinsic Regulation Material and Extrinsic Social, but the results were not satisfactory. However, we did discover that dropping exm_2 solved the reliability issue for Extrinsic Motivation Material. exm-2 (because of the job security of working for the family business) indirectly reflects a material motivation, whereas exm_1 (it allows me to make a lot of money) and exm_3 (for the fortune I am amassing for myself and my family) are more direct measures of material motivation, so removing exm_2 was theoretically and statistically justified. Our creation of a second order factor we labeled Internal Motivation was a little more complicated. We did not think that including id_4 (this is the type of career I wanted, so I am achieving my life goal) passed the face validity test for our Fear of Failure construct. We decided to test combining id_4 with id_1 (the family business is fulfilling my career plans), which we removed during the EFA due to cross-loading, to create a new factor, Career Fulfillment. id_4 and id_1 are theoretically related to the factors that comprise Personal Purpose so we created a second-order factor, Internal Motivation to reflect both Career Fulfillment and Personal Purpose. Internal Motivation achieved a higher level of reliability than Personal Purpose alone, as well as sufficient convergent validity. We were unable to improve Cronbach s Alpha for the Extrinsic Motivation Social factor, but composite reliability (.662) was very close to the.70 threshold recommended by Hair et al. (2010), and it demonstrated adequate convergent and discriminant validity. We decided to retain Extrinsic Motivation Social for the final measurement model for two reasons. The construct is theoretically meaningful as exs_2 (because a family 167

192 member(s) expected me to work in the family business) and exs_3 (to avoid being criticized by family members) reflect pressure the next-generation leader feels from the family to work in the family firm and is negatively correlated with the Utrecht Work Engagement construct, one of the two dependent variables in our model. In addition, a model tested without Extrinsic Motivation Social threw a negative error variance, so model fit was much better with it in the model than without it. The five-factor model that included two second-order factors exhibited good model fit with CMIN/DF = 1.557, GFI =.893, CFI =.930, RMSEA =.055, and PCLOSE =.261 (see Table 18 for a summary of CFA results). We tested for convergent validity of the factors in the next-generation only measurement model using three tests recommended by Fornell and Larker (1981): item reliability, composite reliability, and average variance extracted. After removing the items detailed above, all remaining items demonstrated standardized loadings on their respective factors greater than.50, demonstrating item reliability (Hair et al., 2010). Composite reliability for three of the factors was greater than.70, indicating internal consistency (Hair et al., 2010). Composite reliability for Extrinsic Motivation Material (.69) and Extrinsic Motivation Social (.66) were very close to the.70 threshold and were judged acceptable. Average variance extracted (AVE) for each of the five factors was equal to or greater than.50, the minimum threshold recommend by Hair et al. (2010), indicating that the variance captured by the factor is greater than variance due to measurement error. Discriminant validity is demonstrated when the variance shared between a construct and any other construct in a structural equation model (SEM) is less than the 168

193 variance shared between the construct and its measures (Fornell et al., 1982). Discriminant validity is assessed by comparing the square root of a construct s average variance extracted with that construct s correlations with the other constructs in the model. If the square root of the AVE is greater than the correlations with other constructs in the model (the off-diagonals in a correlation matrix), then discriminant validity is demonstrated (Fornell & Larcker, 1981; Hair et al., 2010). Our test using this criterion demonstrated the discriminant validity of the five factors that comprise the nextgeneration leader only measurement model, as the AVE for each of the four factors was greater than the maximum shared variance (MSV) and average shared variance (ASV) with any of the other factors. A summary of our test results and the correlation matrix are shown in Table 18. Finally, we tested for common method bias by adding a common latent factor to the model and comparing standardized regression weights of factor loadings with and without the common latent factor (Podsakoff et al., 2003). Differences in factor loadings in the models with and without the common latent factor were all significantly less than.20, indicating the lack of meaningful common method bias. Results of our test are shown in Appendix G. A summary of CFA results is shown in Table 18. Our final CFA measurement model for Utrecht Work Engagement and Motivation to Work is shown in Appendix H. 169

194 Table 18. Utrecht Work Engagement and Motivation to Work CFA Measurement Model Results (n = 185) Constructs/ Items Mean Standard Deviation Standardized Regression Weights Cronbach's Alpha Composite Reliability Average Variance Extracted Maximum Shared Variance Average Shared Variance Criteria >.50 >.70 >.70 >.50 < AVE < AVE Utrecht Work Engagement uwe_1_ uwe_2_ uwe_3_ uwe_4_ uwe_5_ uwe_6_ uwe_7_ Internal Motivation id_1_ id_2_ id_4_ inj_4_ int_4_ Extrinsic Motivation Material exm_1_ exm_3_ Extrinsic Regulation Social exs_2_ exs_3_ Introjected Regulation inj_1_ inj_2_ inj_3_ inj_5_ Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 155 CMIN/DF < Carmines & McIver (1981) GFI > Hair et al. (2010:649) CFI > Hair et al. (2010:654) RMSEA (LO 90 - HI 90 < Hair et al. (2010:654) PCLOSE >

195 Table 18 (continued) Utrecht Work Engagement and Motivation to Work CFA Measurement Model Results (n = 185) Correlations Matrix CR AVE MSV ASV ExtRegS UWE IntMot ExtRegM InjReg ExtRegS UWE IntMot ExtRegM InjReg Note: Square root of AVEs on the diagonals. Creating the Structural Equation Model As explained in the design section of the paper, we used a 360-degree multi-rater approach in gathering data about the leadership behavior of the next-generation family leaders in our study. To test our hypotheses using a structural equation model (SEM), we only included data for next-generation leaders for whom we received at least two usable multi-rater responses. Out of the 185 next-generation leaders who participated in our study, we received 100 complete data sets comprised of responses from next-generation leaders matched with responses from at least two of their multi-raters. The number of multi-rater responses per next-generation leader ranged from two to seven, and averaged 3.5. Matched sample characteristics are shown in Table 7. After matching responses from next-generation family leaders with their multiraters, we averaged the scores for every question in the survey to create one data set for each next-generation leader. Next, we created summated scales for the constructs in our study with multiple scales to represent complex concepts in a single measure (Hair et al., 2010). In the structural equation model, we used summated scales as indicators for Family Climate, Emotional and Social Intelligence, and Family Business Climate. For all 171

196 other latent constructs in the model, we used the average scores of individual items as indicators. We modeled Intergenerational Authority as a separate construct as it was negatively correlated with and orthogonal to the other Family Climate scales (Björnberg & Nicholson, 2007). Based on the results of our EFA and CFA, we modeled Responsibility and Accountability as two separate constructs. We modeled Internal Motivation as a second-order construct reflecting Personal Purpose and Career Fulfillment; Introjected Regulation as a second-order construct reflecting Fear of Failure and Succession Pressure; and External Regulation Social as a separate construct, as developed during the CFA of the full data set in AMOS. As a result, we relabeled H4 as H4a and H4b, H6 as H6a and H6b, and H10b as H10b(1) and H10b(2) to separately evaluate the two dimensions of controlled motivation, Extrinsic Regulation Social and Introjected Regulation. We relabeled H7 as H7a and H7b and H8 as H8a and H8b to separately evaluate Responsibility and Accountability. We included age and size of family business, as measured by annual revenue, as controls in all analyses of the structural equation model. We used Partial Least Squares Structural Equation Modeling (PLS-SEM) to build our model and test our hypotheses. PLS is a regression-based technique that has emerged as a powerful method for testing causal models with multiple constructs and indicators and small sample sizes. It was superior to other SEM approaches for our study because our structural model is complex with many indicators, our matched sample size of 100 is small given the complexity of our model, and we were particularly interested in identifying key driver constructs for our dependent variables, Leadership Effectiveness 172

197 and Work Engagement (Hair Jr et al., 2013). We used Smart PLS 2.0 M3, the most current version of the software at the time of our study. We created a base case structural equation model that reflected our hypothesized relationships. We ran the model to calculate regression coefficients and conducted bootstrapping using 5,000 samples of the data (Hair Jr et al., 2013) to determine significant relationships. We trimmed the model of any paths whose regression coefficients were not significant. All remaining paths were significant at a 99% confidence level, as indicated by t-values of at least 2.58 (p <.01), except for the relationships between Extrinsic Regulation Social and Family Business Climate (t = 2.19, p <.05), Intergenerational Authority and Emotional and Social Intelligence (t = 2.47, p <.05), and Internal Motivation and Leadership Effectiveness (t = 2.27, p <.05), which were all significant at a 95% confidence level. We removed one latent variable from the model, Extrinsic Regulation Material, as it failed to exhibit any statistically significant relationships with other variables in the model. Our final base case structural equation model is shown in Appendix I. Measurement Model Analysis in Smart PLS Smart PLS assesses the measurement model and structural model simultaneously. We used outer model statistics calculated by Smart PLS to assess the measurement model for our matched data set, which confirmed our findings for the measurement model we created in AMOS for the full data set. Indicator reliability is demonstrated by outer loadings of.708 or higher on the latent variables in a PLS model (Hair Jr et al., 2013). All of the indicators in our final measurement model met this standard except id_2 (.66), id_4 (.62), inj_3 (.64), and uwe_6 (.58). Hair et al. (2013) recommend removing 173

198 indicators with outer loadings between.40 and.70 only if doing so results in an increase in the composite reliability and/or average variance extracted for the latent variable on which they load above their suggested threshold values (see Table 19). Since this was not the case for these four indicators, we left them in the model. Composite reliability was above the recommended threshold of.708 for all constructs (Hair Jr et al., 2013). Average variance extracted was above the.50 threshold (Hair Jr et al., 2013) for all constructs except Internal Motivation (.47), which was very close to the threshold level. Discriminant validity for all constructs was demonstrated using two tests. First, we examined the cross loadings table that is part of the Smart PLS output and determined that the loading of each indicator on its primary construct was higher than its loading on any other construct (Hair Jr et al., 2013). Using the test recommended by Fornell & Larcker (1981), we determined that the average variance extracted for each construct was greater than its maximum shared variance with any other construct. This is determined by squaring the highest correlation with any other construct and comparing the result to the AVE. It can also be determined by comparing the square root of the AVE for a construct with its highest correlation with any other construct as we have done in the correlations matrix shown in Table 20. Finally, R² values for the endogenous variables in a Smart PLS model are important in assessing model fit as they measure the amount of variance in the construct explained by the exogenous variables in the model. While exact interpretations of R² values are dependent upon the complexity of a model and research discipline, in general, R² values of.75 and above are considered substantial, values of are considered moderate, and values of are considered weak (Hair Jr et al., 2013). In our model, the constructs of primary interest are our dependent variables 174

199 Leadership Effectiveness and Work Engagement, and our hypothesized mediating variable Family Business Climate. Our base model achieved a substantial R² value of.76 for Leadership Effectiveness, a moderate R² value of.57 for Family Business Climate, and a somewhat weak R² value of.29 for Work Engagement, although as pointed out by Hair et al.(2013), in some disciplines this might be considered moderate or strong. Overall, our model exhibits adequate fit for meaningful evaluation of our hypotheses. A summary of our measurement model evaluation in Smart PLS (essentially a Smart PLS CFA) is shown in Table

200 Table 19. Next-Generation Leadership Model Base Case Smart PLS CFA Measurement Model Results (n = 100) Constructs/Items Standardized Regression Weights Standard Composite Deviation t-statistic Reliability Average Maximum Variance Extracted Shared Variance R² Criteria >.708 > 1.96 >.708 >.50 < AVE Accountability ra_ ra_ ra_ Emotional and Social Intelligence ASL_C CM_C OA_C PETL_C Extrinsic Regulation Social exs_ exs_ Family Business Climate CMP_C OPM_C VSN_C Family Climate N/A CogC_C IAtt_C OC_C Intergenerational Authority N/A iaut_ iaut_ iaut_ Introjected Regulation N/A inj_1 <- InjReg inj_2 <- InjReg inj_3 <- InjReg inj_5 <- InjReg Internal Motivation id_ id_ id_ inj_ int_ Leadership Effectiveness lev_ lev_ lev_ lev_ lev_ Responsibility ra_ ra_ ra_ ra_ ra_ ra_ ra_ ra_ Work Engagement uwe_ uwe_ uwe_ uwe_ uwe_ uwe_ uwe_

201 Table 20. Next-Generation Leadership Model Base Case Correlations Matrix Correlations Matrix ACCT Age CarFul ESI ExtRegS FBC FC FOF IAut InjReg IntMot LEV PURP RESP Size SucPres UWE ACCT 0.86 Age CarFul ESI ExtRegS FBC FC FOF IAut InjReg IntMot LEV PURP RESP Size SucPres UWE Note: Square root of construct AVEs on the diagonal. 177

202 Findings Structural Model Analysis in Smart PLS Collinearity Assessment of Predictor Variables The first step on analyzing an SEM in Smart PLS is to test for collinearity of predictor variables to ensure that they are sufficiently distinct. Tolerance and its inverse, the variance inflation factor (VIF), measure collinearity. Tolerance is simply the amount of variance in an independent variable that is not explained by the other independent predictor variables. Tolerance values below.20 and VIF values above 5 indicate potential collinearity problems (Hair Jr et al., 2013). Smart PLS does not provide tolerance or VIF values, so we used IBM SPSS Statistics to perform a collinearity analysis on the predictor variables in our model, all of which demonstrated tolerance and VIF values within acceptable limits. See Table 21 for a summary of the collinearity assessments of the predictor variable for each endogenous construct in the model. 178

203 Table 21. Next-Generation Leadership Model Base Case Smart PLS Measurement Model Collinearity Assessment Emotional and Social Intelligence, Leadership Autonomous Motivation, Controlled Effectiveness Motivation, Accountability and and Responsibility Work Engagement Tolerance VIF Tolerance VIF CogC_CT ASL_CT IAtt_CT CM_C IAut_C OA_CT OC_CT PETL_CT Family Business Climate PURP_CT Tolerance VIF ExtRegM_C ASL_CT ExtRegS_CT CM_C FOF_C OA_CT SucPres_C PETL_CT ACCT_CT PURP_CT RESP_CT ExtRegM_C CMP_C ExtRegS_CT OPM_CT FOF_C VSN_CT SucPres_C ACCT_CT RESP_CT CogC_CT IAtt_CT IAut_C OC_CT Significance of Path Coefficients Our next step was to examine the size and significance of the path coefficients of the hypothesized relationships in our model by using bootstrapping in Smart PLS. We conducted bootstrapping using 5,000 samples as recommended by Hair et al. (2013) to determine the significant relationships in our model as shown in Table 22. A summary of hypothesis test results is provided in Table 23. Results were as follows: 179

204 H1: The emotional and social intelligence competencies of next-generation family firm leaders have a positive effect on their leadership effectiveness. As expected, Emotional and Social Intelligence (ESI) had a strong positive direct effect on Leadership Effectiveness (LEV) (.67, p <.01). H2: The emotional and social intelligence competencies of next-generation family firm leaders have a positive effect on the degree to which they are engaged with their work in the family business. ESI had no direct effect on Work Engagement (UWE). H3: The autonomous (self-determined) motivations of next-generation family leaders for working in the family business have a positive effect on their leadership effectiveness. As expected, autonomous motivation as represented in our model by Internal Motivation (IntMot) had a positive direct effect on LEV (.14, p <.05). H4a: The controlled (non-self-determined) motivations of next-generation family leaders for working in the family business have a negative effect on their leadership effectiveness. Controlled motivation as represented by Extrinsic Regulation Social (ExtRegS) in our model had no direct effect on LEV. H4b: The controlled (non-self-determined) motivations of next-generation family leaders for working in the family business have a negative effect on their leadership effectiveness. Controlled motivation as represented by Introjected Regulation (InjReg) in our model had no direct effect on LEV. H5: The autonomous (self-determined) motivations of next-generation family leaders for working in the family business have a positive effect on the degree to which they are engaged with their work. Autonomous motivation as represented in our model by IntMot had no direct effect on UWE. 180

205 H6a: The controlled (non-self-determined) motivations of next-generation family leaders for working in the family business have a negative effect on the degree to which they are engaged with their work. Controlled motivation as represented by ExtRegS in our model had no direct effect on UWE. But because ExtRegS had a negative direct effect on Family Business Climate (FBC) (-.18, p <.05) and FBC had a positive direct effect on UWE (.29, p <.01), ExtRegS had a negative indirect effect on UWE (-.05, p <.10) through the mediating variable FBC (Hair Jr et al., 2013). H6b: The controlled (non-self-determined) motivations of next-generation family leaders for working in the family business have a negative effect on the degree to which they are engaged with their work. Controlled motivation as represented by InjReg in our model had no direct effect on UWE. But because InjReg had a positive direct effect on FBC (.28, p <.01), and FBC had a positive direct effect on UWE (.29, p <.01), InjReg had a positive indirect effect on UWE (.08, p<.01) through the mediating variable FBC. This is the opposite of what we expected and we explore a possible explanation in the discussion section below. H7a: The degree to which next-generation family firm leaders accept responsibility for their decisions and actions in the family business has a positive effect on their leadership effectiveness. As expected Responsibility (RESP) had a positive direct effect on LEV (.21, p <.01). H7b: The degree to which next-generation family firm leaders are held accountable for their decisions and actions in the family business has a positive effect on their leadership effectiveness. Accountability (ACCT) had no direct effect on LEV. 181

206 H8a: The degree to which next-generation family firm leaders accept responsibility for their decisions and actions in the family business has a positive effect on the degree to which they are engaged with their work. RESP had no direct effect on UWE. But because RESP had a positive direct effect on FBC (.46, p <.01) and FBC had a positive direct effect on UWE (.29, p <.01), RESP had a positive indirect effect on UWE (.13, p <.01) through the mediating variable FBC. H8b: The degree to which next-generation family firm leaders are held accountable for their decisions and actions in the family business has a positive effect on the degree to which they are engaged with their work. As expected, ACCT had a positive direct effect on UWE (.33, p <.01). H9a: A positive family climate positively influences the development of emotional and social intelligence competencies of next-generation leaders in family firms. Family Climate (FC) had no direct effect on ESI. H9b: Intergenerational Authority negatively influences the development of emotional and social intelligence competencies of next-generation leaders in family firms. As expected, Intergenerational Authority (IAUT) had a negative direct effect on ESI (-.21, p <.05). H10a: A positive family climate positively influences the autonomous (selfdetermined) motivations of next-generation family firm leaders to work in the family business. As expected, FC had a positive direct effect on IntMot (.39, p <.01). H10b: Intergenerational Authority positively influences the controlled (non-selfdetermined) motivations of next-generation family firm leaders to work in the family 182

207 business. (1) As expected, IAut had a positive direct effect on ExtReg (.38, p <.01). (2) IAut had no significant effect on InjReg. H11a: A positive family climate positively influences the degree to which nextgeneration family firm leaders accept responsibility for their decisions and actions in the family business. As expected, FC had a positive direct effect on RESP (.33, p <.01). H11b: Intergenerational Authority negatively influences the degree to which next-generation family firm leaders accept responsibility for their decisions and actions in the family business. As expected, IAut had a negative direct effect on RESP (-.30, p <.01). H12a: A positive family climate positively influences the degree to which nextgeneration family firm leaders are held accountable for their decisions and actions in the family business. As expected, FC had a positive direct effect on ACCT (.23, p <.01). H12b: Intergenerational Authority negatively influences the degree to which next-generation family firm leaders are held accountable for their decisions and actions in the family business. As expected, IAut had a negative direct effect on ACCT (-.27, p <.01). H13a: A positive family climate positively influences the organizational climate of the family business owned by that family. FC had no direct effect on FBC. H13b: Intergenerational Authority negatively influences the organizational climate of the family business owned by that family. As expected, IAut had a negative direct effect on FBC (-.32, p <.01). H14a: Family Business Climate (FBC) mediates the relationships between the emotional and social intelligence competencies of next-generation family firm leaders 183

208 and their leadership effectiveness and engagement with work. We found no direct relationship between ESI and FBC, so no mediation was possible. H14b: Family Business Climate mediates the relationships between the motivations of next-generation family leaders for working in the family business and their leadership effectiveness and engagement with work. Because there was no direct relationship between FBC and LEV, FBC did not serve as a mediator for the relationship of any of the other variables in the model and LEV. We found that FBC did serve as a mediator for the rather weak indirect effects of ExtRegS (-.05, p <.10) and InjReg (.08, p <.01) on UWE. H14c: Family Business Climate mediates the relationships of the degree to which next-generation family firm leaders accept responsibility and are held accountable for their decisions and actions in the family business and their leadership effectiveness and engagement with work. As pointed out above, FBC did not perform as a mediator for any of the relationships between other variables in the model and LEV since there was no direct relationship between FBC and LEV. We did find that FBC served as a mediator for the indirect effect of RESP on UWE (.13, p <.01). While Family Business Climate did not perform as strongly as a mediator in the ways we hypothesized, it did play a mediating role for a number of important indirect relationships with UWE, which we further explored in our post hoc analysis detailed below. 184

209 Table 22. Significance Testing Results of the Base Case Structural Model Path Coefficients Path Path Coefficient Standard Deviation t Value Significance Level ACCT -> UWE *** Age -> ACCT *** Age -> LEV *** ESI -> LEV *** ExtRegS -> FBC ** FBC -> UWE *** FC -> ACCT *** FC -> IntMot *** FC -> RESP *** IAut -> ACCT *** IAut -> ESI ** IAut -> ExtRegS *** IAut -> FBC *** IAut -> RESP *** InjReg -> FBC *** InjReg -> FOF *** InjReg -> SucPres *** IntMot -> CarFul *** IntMot -> LEV ** IntMot -> PURP *** RESP -> FBC *** RESP -> LEV *** Size -> FBC ** **p <.05, ***p <

210 Hypothesis Table 23. Summary of Hypothesis Test Results Direct Effect Coefficient Support for Direct Effect Hypothesi s FBC Mediation (Indirect Coefficient) H1: ESI LEV 0.67*** Yes None H2: ESI UWE ns No None H3: IntMot LEV 0.14** Yes None H4a: ExtRegS LEV ns No None H4b: InjReg LEV ns No None H5: IntMot UWE ns No None H6a: ExtRegS UWE ns No Indirect (-.05*) H6b: InjReg UWE ns No Indirect (.08***) H7a: RESP LEV 0.21*** Yes None H7b: ACCT LEV ns No None H8a: RESP UWE ns No Indirect (.13***) H8b: ACCT UWE 0.33*** Yes None H9a: FC ESI ns No N/A H9b: IAut ESI -0.21** Yes N/A H10a: FC -> IntMot 0.39*** Yes N/A H10b(1): IAut ExtRegS 0.38*** Yes N/A H10b(2): IAut InjReg ns No N/A H11a: FC RESP 0.33*** Yes N/A H11b: FC ACCT 0.23*** Yes N/A H12a: IAut RESP -0.30*** Yes N/A H12b: IAut ACCT -0.27*** Yes N/A H13a: FC FBC ns No N/A H13b: IAut FBC -0.32*** Yes N/A Notes: ns = non-significant; N/A = not applicable *p <.10, **p <.05, ***p <.01 Family Business Climate Mediation Results Three types of mediation are possible: full, partial, and indirect. Full mediation occurs when a relationship between two variables X and Y is fully explained by an intervening variable A. Evidence of full mediation is present when a significant direct 186

211 relationship between X and Y becomes insignificant when a third variable A, that is significantly and directly related to both X and Y, is introduced between them. Evidence of partial mediation is present when the direct relationship between X and Y remains, but is weaker, when the mediating variable A is introduced. Indirect mediation occurs when there is no significant direct relationship between X and Y but there are significant direct relationships between X and A, and A and Y. This indicates that X does have an effect on Y through its effect on A (Hair et al., 2010). In our model, Family Business Climate served as a mediator for the indirect effects of Extrinsic Regulation Social (ExtRegS), Introjected Regulation (InjReg), and Responsibility (RESP) on Work Engagement (UWE). As expected ExtRegS had a negative effect on UWE (-.05, p <.10) and RESP had a positive effect on UWE (.13, p <.01). But contrary to our expectation, InjReg had a positive, rather than a negative, effect on UWE (.08, p <.01). We will comment on this in the discussion section of the paper. Total Effects In Smart PLS, the total effects (direct and indirect) of exogenous variables on endogenous variables provide the greatest insight (Hair Jr et al., 2013). In our base model, while nine of the eleven hypothesized direct relationships of Family Climate (FC) and Intergenerational Authority (IAut) were supported, the total effects of these two dimensions of family climate demonstrated that they were even more important in explaining the endogenous constructs in our model than the direct effects alone indicated. For example, FC did not exhibit a significant direct effect on Family Business Climate (FBC), but it did have a significant indirect effect on FBC (.15, p <.01) through its direct 187

212 effect on Responsibility (RESP) (.33, p <.01). Similarly, FC did not have a significant direct effect on Leadership Effectiveness (LEV), but it did have a significant indirect effect on LEV (.12, p <.01) through its direct effect on RESP (.33, p <.01). And while FC did not have a significant direct relationship with Work Engagement (UWE), it did have a significant indirect effect on UWE (.12, p <.01) through its direct effect on RESP (.33, p <.01). IAut had a significant direct effect on FBC (-.32, p <.01), but its total effect is even stronger (-.52, p <.01) when its indirect effect on FBC through its direct effects on RESP (-.30, p <.01) and Extrinsic Regulation Social (ExtRegS) (.33, p <.01) are taken into account. And while IAut did not have a significant direct effect on LEV, its negative indirect effect on LEV was significant (-20, p <.01) through its direct effects on Emotional and Social Intelligence (ESI) (-.21, p <.05) and RESP (-.30, p <.01). IAut also failed to exhibit a significant direct effect on our other dependent variable, UWE, but had a negative significant total effect on UWE (-.24, p <.01) through its direct effects on FBC (-.32, p <.01) and ACCT (-.27, p <.01). See Table 24 for a summary of the total effects of all variables with significant effects on other variables in our base model. Table 24. Significance Testing Results of the Base Case Total Effects Path Total Effect Standard Deviation t Value Significance Level ACCT -> UWE *** Age -> ACCT *** Age -> LEV *** Age -> UWE ** ESI -> LEV *** ExtRegS -> FBC ** ExtRegS -> UWE * FBC -> UWE *** FC -> ACCT *** FC -> CarFul *** 188

213 FC -> FBC *** FC -> IntMot *** FC -> LEV *** FC -> PURP *** FC -> RESP *** FC -> UWE *** IAut -> ACCT *** IAut -> ESI ** IAut -> ExtRegS *** IAut -> FBC *** IAut -> LEV *** IAut -> RESP *** IAut -> UWE *** InjReg -> FBC *** InjReg -> FOF *** InjReg -> SucPres *** InjReg -> UWE *** IntMot -> CarFul *** IntMot -> LEV ** IntMot -> PURP *** RESP -> FBC *** RESP -> LEV *** RESP -> UWE *** Size -> FBC ** Size -> UWE ** *p <.10, **p <.05, ***p <.01 Effect Size f² The next step in evaluating the predictive power of a structural equation model in Smart PLS is to calculate the relative contribution of each exogenous variable in the model to the coefficient of determination (R² value) of the endogenous variable it predicts. The formula for calculating f² value is as follows: f² = R² included - R² excluded, 1 - R² included 189

214 where R² included and R² excluded are the R² values of an endogenous latent variable when a selected exogenous latent variable is included in or excluded from the model (Hair Jr et al., 2013). Cohen (1988) suggests that f² values of.02,.15, and.35 respectively, represent small, medium, and large effects. The strongest f² effects in our base model include the effect of Emotional and Social Intelligence on Leadership Effectiveness (.68), the effect of Responsibility on Family Business Climate (.39),, the effect of Family Climate on Internal Motivation (.18), the effect of Intergenerational Authority on Extrinsic Regulation Social (.17), and the effect of Intergenerational Authority on Family Business Climate (.17). See Table 25 for the f² effects of all exogenous latent variables in our base model. Table 25. Base Case f² and q² Effects Path Coefficien t f² Effect Value f² Effect Size* Path q² Effect q² Effect Value Size* ACCT UWE Small 0.06 Small Age ACCT Small 0.04 Small Age LEV Small 0.04 Small ESI LEV Large 0.39 Large ExtRegS FBC Small 0.03 Small FBC UWE Small 0.05 Small FC ACCT Small 0.04 Small FC IntMot Medium 0.08 Small FC RESP Small 0.09 Small IAut ACCT Small 0.06 Small IAut ESI Small 0.03 Small IAut ExtRegS Medium 0.12 Small IAut FBC Medium 0.10 Small IAut RESP Small 0.07 Small InjReg FBC Small 0.07 Small IntMot LEV Small 0.04 Small RESP FBC Large 0.23 Medium RESP LEV Small 0.03 Small Size FBC Small 0.02 Small *Cohen,

215 Predictive Relevance In addition to examining the coefficient of determination (R²) values of the endogenous latent variables in a Smart PLS structural equation model as we did in the measurement model section of the paper above, the predictive relevance of the model should also be evaluated (Hair Jr et al., 2013). A model that demonstrates predictive relevance is one that accurately predicts the data points of indicators of reflective endogenous constructs like the ones in our model. Predictive relevance is measured using Stone-Geisser s Q² value (Geisser, 1974; Stone, 1974). Q² values larger than zero for an endogenous latent variable indicate that the paths in the model leading to that construct exhibit predictive relevance. We used the blindfolding feature in Smart PLS to calculate Q² values for each of the endogenous latent variables in our base model. All exhibited Q² values greater than zero demonstrating the predictive relevance of our model. Q² and R² values are shown in Table 26. Table 26. Base Case Endogenous Latent Variable R² and Q² Values Endogenous Latent Variable R² Value Q² Value ACCT CarFul ESI ExtRegS FBC FOF IntMot LEV PURP RESP SucPres UWE

216 We also calculated the q² effect size for each direct path in our model, which indicates the predictive relevance of a specific exogenous latent variable for an endogenous latent variable. The calculation follows the same procedure used to calculate the f² effect size using the following formula: q² = Q² included - Q² excluded, 1 - Q² included where Q² included and Q² excluded are the Q² values of an endogenous latent variable when a selected exogenous latent variable is included in or excluded from the model. Values of.02,.15, and.35 respectively represent small, medium, and large q² effect sizes (Hair Jr et al., 2013). The largest q² effect sizes in our base model were the effects of ESI on LEV (.39) and RESP on FBC (.23). A summary of q² effect sizes for all endogenous constructs in our model is included in Table 25 above. Controls We controlled for the age of the next generation leaders in our study, as well as for the size of their family businesses as measured by revenue. Age had significant direct effects on Accountability (.25, p <.01) and Leadership Effectiveness (.14, p <.01), and an indirect effect on Work Engagement (.08 p <.05) through its effect on Accountability. Size of the firm had a significant direct effect on Family Business Climate (.16, p <.05) and an indirect effect on UWE (.05, p <.05) through its direct effect on Family Business Climate. Post-Hoc Analysis Results from testing our hypothesized relationships produced a number of unexpected results. We had expected Family Business Climate to play a mediating role 192

217 in the relationships between the independent variables in our model and Leadership Effectiveness. While Family Business Climate did serve as a mediator for the indirect effects of next generation leader motivations to work in the family business and the degree to which next-generation leaders accept responsibility and their engagement with work, Family Business Climate had no significant direct relationship with Leadership Effectiveness, so it could not mediate other relationships with Leadership Effectiveness. On the other hand, Family Climate and Intergenerational Authority, the positive and negative dimensions of overall family climate, exhibited significant indirect effects on Leadership Effectiveness and Work Engagement, our two dependent variables of primary interest. Intergenerational Authority, the negative dimension of overall family climate, had a significant negative indirect relationship with Leadership Effectiveness (-.20, p <.01) through its direct effects on Emotional and Social Intelligence (-.21, p <.05) and Responsibility (-.30. p <.01); and a significant negative indirect effect on Work Engagement (-.24, p <.01) through its direct effects on Accountability (-.27, p <.01) and Family Business Climate (-.32, p <.01). Family Climate, the positive dimension of overall family climate, had a significant positive indirect effect on Leadership Effectiveness (.12, p <.01) through its direct effects on Responsibility (.33, p <.01) and Internal Motivation (.39, p <.01); and a significant positive indirect relationship with Work Engagement (.12, p <.01) through its direct effect on Accountability (.23, p <.01). We wondered if there might be other meaningful indirect relationships between Family Climate and Intergenerational Authority and Leadership Effectiveness that we had failed to hypothesize. 193

218 We had also expected Responsibility to demonstrate a stronger relationship with Leadership Effectiveness based on theory and our own qualitative research. While our base model did demonstrate a significant direct effect of Responsibility on Leadership Effectiveness (.21, p <.01), we surmised that the total effect might be even stronger. In examining our correlations matrix, we observed a strong correlation between Responsibility and Emotional and Social Intelligence, which was the primary predictor of Leadership Effectiveness (.67, p <.01) in our model. In addition, learning Emotional and Social Intelligence competencies is sensitive to context (Cherniss & Adler, 2000), suggesting that family climate may play a stronger role than what our base model demonstrated. With this evidence, we decided to conduct a post hoc analysis to explore the relationship between Responsibility and Emotional and Social Intelligence and how that relationship might influence the indirect relationships of Family Climate and Intergenerational Authority on Leadership Effectiveness. To do so, we added a path between Responsibility and Emotional and Social Intelligence to create the revised final model shown in Figure 18. We then analyzed the revised final model, conducting all of the same statistical procedures we performed on our base model. 194

219 Figure 18. Next-Generation Leadership Effectiveness and Work Engagement Final Revised Structural Model Emotional & Social Intelligence (ESI) R² =.55.74*** H1.67*** H11a.33*** Responsibility (RESP) R² =.23.69*** H7a,.21*** Leadership Effectiveness (LEV) R² =.73 Positive Family Climate (FC) Intergenerational Authority (IAut) H12a -.30*** H10b(1).38*** H10a.39*** Accountability (ACCT) R² =.55 Autonomous Motivation (IntMot) R² =.15 H13b -.32*** Controlled Motivation (ExtRegS) R² =.14 H14.46*** H ** H14.28*** H3.14** H8b.32*** Family Business Climate (FBC) R² =.55 H14.29*** Work Engagement (UWE) R² =.27 Controls: Age, size of family business **p <.05, ***p <.01 Controlled Motivation (InjReg) Hypothesized Relationship Un-hypothesized Relationship 195

220 Structural Model Analysis of Revised Model in Smart PLS A detailed explanation of our post hoc analysis follows. See Figure 19 for a flow chart detailing our post-hoc data analysis process. Figure 19. Data Analysis Flow Chart Post-Hoc Analysis Revised Structural Equation Model Create Revised SEM in PLS (n = 100) Collinearity Assessment of Predictor Variables Structural Equation Model (SEM) Analysis in PLS Calculate Path Coefficients Bootstrap 5,000 Samples to Determine t Values Trim Non-Significant Paths Conduct Mediation Tests In-Depth Structural Equation Model (SEM) Analysis in PLS Evaluate Total Effects Calculate R² Values Calculate Q² Values Calculate f² Effects Assess Controls Collinearity Assessment of Predictor Variables As shown in Table 27, there were no collinearity issues as all predictor variables in the revised model exhibited tolerance levels well above.20 and VIF levels well below 5.0, the thresholds recommend by Hair et al. (2013). 196

221 Table 27. Next-Generation Leadership Revised Model Collinearity Assessment Emotional and Social Family Business Climate Intelligence Tolerance VIF Tolerance VIF IAut_C IAut_C RESP_CT RESP_CT Accountability ExtRegS_CT Tolerance VIF FOF_C CogC_CT SucPres_C IAtt_CT Responsibility IAut_C Tolerance VIF OC_CT CogC_CT RESP_CT IAtt_CT Leadership Effectiveness IAut_C Tolerance VIF OC_CT ASL_CT Work Engagement CM_C Tolerance VIF OA_CT ACCT_CT PETL_CT CMP_C RESP_CT OPM_CT PURP_CT VSN_CT Significance of Path Coefficients The significance test of the direct path coefficients of the revised model produced several meaningful results. First, the effect of Responsibility on Emotional and Social Intelligence was significant and strong (.74, p <.01). Second, the significant direct relationship between Intergenerational Authority and Emotional and Social Intelligence that existed in our base model (-.21, p <.05) dropped out of significance in the revised model (.05, ns), indicating that Responsibility fully mediates the relationship between Intergenerational Authority and Emotional and Social Intelligence (Baron & Kenny, 1986), a finding we confirmed with a specific mediation test detailed below. And third, the coefficient of determination (R²) value of Emotional and Social Intelligence increased 197

222 from.043 in our base case model to.548 in our revised model (see Table 32), indicating that the degree to which a next generation leader accepts responsibility for his or her actions and decisions accounts for 55% of the variance in his or her emotional and social intelligence competencies in our model. Achieving high R² values is a goal in Smart PLS, and the meaningfully higher R² value for Emotional and Social Intelligence in our revised model indicates that it fits our data better than the base model (Hair Jr et al., 2013). A summary of the significant direct paths in our revised model is shown in Table 28. Table 28. Significance Testing Results of the Revised Structural Model Path Coefficients Path Path Coefficient Standard Deviation t Value Significance Level ACCT -> UWE *** Age -> ACCT *** Age -> LEV *** ESI -> LEV *** ExtRegS -> FBC ** FBC -> UWE *** FC -> IntMot *** FC -> RESP *** IAut -> ExtRegS *** IAut -> FBC *** IAut -> RESP *** InjReg -> FBC *** IntMot -> LEV ** RESP -> ACCT *** RESP -> ESI *** RESP -> FBC *** RESP -> LEV *** Size -> FBC ** **p <.05, ***p <

223 Total Effects Our analysis of the total effects in the revised model also tells a powerful story. The base model indicated no effect of Family Climate on Emotional and Social Intelligence, while the revised model indicates a significant indirect effect of Family Climate on Emotional and Social Intelligence (.24, p <.01) through its direct effect on Responsibility (.33, p <.01). As a result, the total effect of Family Climate on Leadership Effectiveness increased from.12 (p <.01) in the base model to a much stronger.29 (p <.01) in the revised model. And while the direct effect of Intergenerational Authority on Emotional and Social Intelligence dropped out of significance in the revised model, its total effect on Emotional and Social Intelligence actually increased slightly (-.22, p <.01), from its total effect in the base model (-.21 p <.05). Similarly, the total effect of Intergenerational Authority on Leadership Effectiveness also increased marginally (-.21, p <.01) in the revised model when compared to the base model (-.20, p <.01). Finally, the revised model showed a much clearer picture of the importance of the degree to which next generation family leaders accept responsibility for their decisions and actions on their effectiveness as leaders, as the total effect of Responsibility on Leadership Effectiveness increased dramatically from.21 (p <.01) in the base model to.70 (p <.01) in the revised model. The revised model also suggested that Emotional and Social Intelligence mediates the relationship between Responsibility and Leadership Effectiveness, which we confirmed with a specific mediation test detailed below. A summary of total effects in the revised model is shown in Table

224 Table 29. Significance Testing Results of the Revised Model Total Effects Path Path Coefficient Standard Deviation t Value Significance Level ACCT -> UWE *** Age -> ACCT *** Age -> LEV *** Age -> UWE ** ESI -> LEV *** ExtRegS -> FBC ** ExtRegS -> UWE * FBC -> UWE *** FC -> ACCT *** FC -> ESI *** FC -> FBC *** FC -> IntMot *** FC -> LEV *** FC -> RESP *** FC -> UWE *** IAut -> ACCT *** IAut -> ESI *** IAut -> ExtRegS *** IAut -> FBC *** IAut -> LEV *** IAut -> RESP *** IAut -> UWE *** InjReg -> FBC *** InjReg -> UWE *** IntMot -> LEV ** RESP -> ACCT *** RESP -> ESI *** RESP -> FBC *** RESP -> LEV *** RESP -> UWE *** Size -> FBC ** Size -> UWE ** *p <.10, **p <.05, ***p <

225 Mediation Analysis As discussed above, an examination of the revised model suggested several important mediation effects. We used the Preacher and Hayes (Preacher & Hayes, 2004, 2008) approach for mediation testing, as it is perfectly suited for Smart PLS-SEM analysis. This method involves bootstrapping the sampling distribution of the indirect effects and can be applied to small sample sizes with greater confidence than other methods (Hair Jr et al., 2013). The first step is to determine that a direct effect of an exogenous variable (X) on an endogenous variable (Y) is significant when no mediator is included in the model. The next step is to test for the significance of the indirect effect of X on Y through a third mediating variable (A). The paths from X A and from A Y must both be significant. In our tests for mediation, we conducted bootstrapping on 5,000 subsamples for each path in a proposed mediated relationship. We then multiplied the path coefficients from X A by the path coefficients from A Y to determine the coefficient of the indirect effect of X on Y for each of the 5,000 subsamples. Next, we calculated the standard deviation of the indirect effects of the subsamples in Microsoft Excel. We then calculated the empirical t value of the indirect effect of X on Y by dividing the original value of the indirect effect by the bootstrapping standard error. For each of the mediation tests we conducted, if the indirect effect of X on Y was significant, we proceeded to the final step, which was to determine the strength of the mediation by calculating the variance accounted for (VAF). The VAF is calculated by adding the direct and indirect effects of X on Y to determine total effect. The VAF is simply the indirect effect divided by the total effect, and measures the percentage of the effect of X on Y that is explained by the mediator A. A VAF greater than 80% indicates full 201

226 mediation; a VAF that is greater than or equal to 20% but less than or equal to 80% indicates partial mediation; and a VAF that is less than 20% indicates no mediation (Hair Jr et al., 2013). In our revised model, we found five meaningful mediated relationships. (1) Responsibility partially mediates the effect of Intergenerational Authority on Family Business Climate (VAF =.30). This result suggest that part of the negative effect of Intergenerational Authority on the Family Business Climate of the entire organization is explained by the degree to which next-generation leaders in the family firm fail to assume personal responsibility for their own actions and decisions. (2) Responsibility fully mediates the relationship between Intergenerational Authority and Accountability (VAF =.73). This result indicates that the negative effect of Intergenerational Authority on the degree to which next-generation leaders are held accountable by others for the consequences of their actions and decisions is fully explained by its negative effect on the degree to which next generation leaders accept responsibility for their own actions and decisions. This is a particularly interesting finding because it suggests that nextgeneration leaders are less likely to be held accountable by others when they are also less likely to accept responsibility for their own actions and decisions because the senior leaders in the family firm tend to exercise unquestioned authority. The implication is that a next-generation family leader may get a free ride from others if they fail to exhibit personal responsibility. And because Accountability significantly affects Work Engagement, it further suggests that a next-generation leader influences his or her own engagement with work by the degree to which he or she accepts personal responsibility for his or her leadership behavior. (3) Responsibility fully mediates the relationship 202

227 between Intergenerational Authority and Emotional and Social Intelligence (VAF = 1.29). This result suggests that the negative effect of unquestioned authority exercised by the senior generation on the development of the emotional and social intelligence skills of next generation leaders is fully explained by its negative effect on the degree to which next generation leaders assume personal responsibility for their own actions and decisions. In other words, Intergenerational Authority impedes the development of emotional and social intelligence competencies among next generation leaders in family firms because it makes it less likely that they will assume the personal responsibility that is so strongly related to these leadership skills. (4) Responsibility fully mediates the relationship between Family Climate and Accountability (VAF =.95). This result is the positive opposite of the mediation effect of Responsibility on the negative relationship of Intergenerational Authority on Accountability described above. In this case, the positive effect of Family Climate on the degree to which others hold next-generation leaders accountable for their actions and decisions is fully explained by its positive effect on the degree to which next-generation leaders accept personal responsibility for their actions and decisions. The implication is the opposite of what we described above. A positive Family Climate makes it more likely that a next-generation family leader will be held accountable by others because they are more likely to exhibit personal responsibility for their leadership behavior. And just as we described earlier, it further suggests that a nextgeneration leader influences his or her own engagement with work by the degree to which he or she accepts personal responsibility because of the effect of Accountability on Work Engagement. (5) Emotional and Social Intelligence partially mediates the effect of Responsibility on Leadership Effectiveness (VAF =.70). This suggests that a next- 203

228 generation leader who assumes responsibility for his or her actions and decisions is viewed as an effective leader largely because he or she also demonstrates emotional and social intelligence competencies. A summary of the results of our mediation tests is shown in Table 30. Table 30. Revised Model Mediation Test Results RESP Partially Mediates IAut FBC RESP Fully Mediates FC ACCT Path Path Coefficient t Value Coefficient t Value Direct Effect without RESP Direct Effect without RESP IAut -> FBC FC -> ACCT Direct Effects with RESP Direct Effects with RESP IAut -> FBC FC -> ACCT IAut -> RESP FC -> RESP RESP -> FBC RESP -> ACCT Indirect Effect Indirect Effect Total Effect Total Effect 0.23 VAF 0.30 VAF 0.95 RESP Fully Mediates IAut ACCT ESI Partially Mediates RESP LEV Path Path Coefficient t Value Coefficient t Value Direct Effect without RESP Direct Effect without ESI IAut -> ACCT RESP -> LEV Direct Effects with RESP Direct Effects with ESI IAut -> ACCT RESP -> LEV IAut -> RESP RESP -> ESI RESP -> ACCT ESI -> LEV Indirect Effect Indirect Effect Total Effect Total Effect 0.70 VAF 0.73 VAF 0.70 RESP Fully Mediates IAut ESI Path Coefficient t Value Direct Effect without RESP IAut -> ESI Direct Effects with RESP IAut -> ESI IAut -> RESP RESP -> ESI Indirect Effect Total Effect VAF

229 Effect Size f² There were several meaningful changes in f² values in our revised model. The f² values for the effects of Family Climate on Accountability and for Intergenerational Authority on Accountability and Emotional and Social Intelligence changed from.06 to zero,.09 to zero and.04 to zero respectively, since these relationships were no longer significant in the revised model. The f² values for the effects of Responsibility on Accountability and Emotional and Social Intelligence, the new paths in our revised model, were 1.20 and 1.21 respectively, the largest f² effects in the entire model. A summary of f² values for the revised model is shown in Table 31. Table 31. Revised Model f² and q² Effects Path Coefficien t f² Effect Value f² Effect Size* Path q² Effect Q² Effect Value Size* ACCT -> UWE Small 0.05 Small Age -> ACCT Small 0.07 Small Age -> LEV Small 0.05 Small ESI -> LEV Large 0.38 Large ExtRegS -> FBC Small 0.03 Small FBC -> UWE Small 0.05 Small FC -> IntMot Medium 0.08 Small FC -> RESP Small 0.09 Small IAut -> ExtRegS Medium 0.12 Small IAut -> FBC Medium 0.10 Small IAut -> RESP Small 0.07 Small InjReg -> FBC Medium 0.08 Small IntMot -> LEV Small 0.04 Small RESP -> ACCT Large 0.67 Large RESP -> ESI Large 0.53 Large RESP -> FBC Medium 0.23 Medium RESP -> LEV Small 0.03 Small Size -> FBC Small 0.02 Small *Cohen,

230 Predictive Relevance We calculated Q² values for the endogenous variables in our revised model. The only meaningful changes were in the Q² values for Accountability, which increased from.155 to.402, and for Emotional and Social Intelligence, which increased from.028 to.348, reflecting the greater predictive relevance of the model for Accountability and Emotional and Social Intelligence due to the addition of the paths from Responsibility to Accountability and Emotional and Social Intelligence. As in the base model, all Q² values are above zero, indicating the predictive relevance for the model as a whole. Q² and R² values are shown in Table 32. We also calculated the q² effect sizes for the endogenous variables in our revised model. The q² values for the effects Family Climate on Accountability and for Intergenerational Authority on Accountability and Emotional and Social Intelligence changed from.04 to zero,.06 to zero and.03 to zero respectively, since these relationships were no longer significant in the revised model. The q² values for the effects of Responsibility on Accountability and Emotional and Social Intelligence, the new paths in our revised model, were.67 and.53 respectively, the largest q² effects in the entire model. A summary of q² effect sizes for the endogenous constructs in the revised model is included in Table 31 above. 206

231 Table 32. Revised Model Endogenous Latent Variable R² and Q² Values Endogenous Latent Variable R² Value Q² Value ACCT CarFul ESI ExtRegS FBC FOF IntMot LEV PURP RESP SucPres UWE Discussion We set out to examine factors that theory and prior research, including our own qualitative study, suggest influence the development of leadership talent among nextgeneration family leaders in family businesses. Weak next-generation leadership is often cited as one of the major reasons family firms fail to survive from one generation of family owners to the next (Ward, 1997), so a deeper understanding of factors that foster or impede the development of leadership skills among next generation family leaders may help to increase the chances of family business survival. We were also interested in learning more about what influences the degree to which next-generation family leaders are positively engaged with their work, as we observed that there were differences in the level of energy and enthusiasm among the next-generation leaders we interviewed for our earlier qualitative study when they told us about their work in the family business. Our study was particularly focused on how the climate of the business-owning family and the climate of the family business organization itself influence the 207

232 development of leadership competencies and positive engagement with work among next-generation family leaders. We know from Emotional and Social Intelligence Theory (Cherniss & Adler, 2000) and Intentional Change Theory (Boyatzis, 2006, 2008) that context matters in making the kinds of changes and in learning the skills required to become an effective leader. And we know from family systems theory (Kerr, 1988) that the family environment plays a key role in the degree to which individuals achieve differentiation that is important to their full functioning as adults, and by extension as leaders. The results of our study demonstrate that family climate in particular has a meaningful impact on the degree to which next-generation family leaders demonstrate effective leadership behaviors and are positively engaged with their work. Perhaps the most intriguing and important finding in our research is that the influence of family climate is indirect, rather than direct. We found no significant direct relationships between family climate and leadership effectiveness or between family climate and work engagement. But family climate significantly affects the degree to which next generation leaders accept responsibility and are held accountable for their actions and decisions, the degree to which they exhibit emotional and social intelligence competencies, the family business organizational climate, and their motivations to work in the family business, all of which either directly or indirectly affect either leadership effectiveness, work engagement, or both (see Table 33). Had we only modeled family climate as an independent variable influencing leadership effectiveness and work engagement, we would have concluded that there was no significant relationship. Only by including the intervening variables mentioned above were we able to discover the true impact of family 208

233 climate on next-generation leader effectiveness and engagement with their work. We now turn to our interpretations of the most important findings in the study. Table 33. Total Effects of Family Climate and Intergenerational Authority Path Path Coefficient Standard Deviation t Value Significance Level FC -> ACCT *** FC -> ESI *** FC -> FBC *** FC -> IntMot *** FC -> LEV *** FC -> RESP *** FC -> UWE *** IAut -> ACCT *** IAut -> ESI *** IAut -> ExtRegS *** IAut -> FBC *** IAut -> LEV *** IAut -> RESP *** IAut -> UWE *** ***p <.01 Summary of Major Findings 1. The emotional and social intelligence competencies of next-generation family firm leaders are the major drivers of their leadership effectiveness. 2. Family climate affects the degree to which next-generation family leaders accept responsibility for their own actions and decisions, which in turn predicts their emotional and social intelligence and leadership effectiveness. 3. Family climate predicts the degree to which next-generation leaders in the family business are held accountable by others, which in turn affects how positively engaged they are with their work. 209

234 4. Family climate influences the motivations of next-generation leaders for working in the family business, which affects their leadership effectiveness and the climate of the family business itself. Family Climate It is critical to understand how we modeled family climate in our study. We used four of the six scales from the Family Climate Scales developed by Björnberg & Nicholson (2007): Open Communication, Intergenerational Authority, Intergenerational Attention, and Cognitive Cohesion. The authors of the scales point out that Intergenerational Authority is orthogonal to the other scales, as it negatively impacts family climate. The other three scales have positive impacts on family climate. Consequently, we modeled Intergenerational Authority as a separate independent variable in our model, grouping the other three scales together and labeling them as Family Climate. Had we not modeled family climate in this way, we would have missed the important differences in the ways the positive and negative influencers of family climate affect the other variables in our model. With this understanding of how we modeled family climate, we now turn to a discussion of the variables that had the greatest impact on the leadership effectiveness and work engagement of the next-generation leaders in our study, and how family climate influenced each of them. Emotional and Social Intelligence Emotional and Social Intelligence was far and away the most important driver of Leadership Effectiveness in our model (.67, p <.01). ESI s large f² (.66) and q² (.38) effect sizes further demonstrate its importance in explaining the leadership effectiveness of the next generation leaders in our study. This was not a surprise as we had 210

235 hypothesized that Emotional and Social Intelligence would have a positive direct effect on Leadership Effectiveness. Many studies in other contexts have demonstrated the importance of emotional and social intelligence to the perceived effectiveness of leaders (Goleman et al., 2002). What was somewhat surprising was that Family Business Climate did not demonstrate a significant direct effect on Leadership Effectiveness and thus could not mediate the relationship between Emotional and Social Intelligence as we had hypothesized, since research suggests that context is important in learning emotional and social intelligence competencies (Cherniss & Adler, 2000). Perhaps for family leaders in a family business context, the influence of family climate is more important than organizational climate to the development of emotional and social intelligence competencies. We had considered this possibility in hypothesizing that Family Climate (the positive dimension of family climate) would positively and directly affect Emotional and Social Intelligence and that Intergenerational Authority (the negative dimension of family climate) would negatively affect Emotional and Social Intelligence. If these hypothesized results were supported, then we would be able to see the degree to which family climate influences the leadership effectiveness of next-generation leaders through its effect on emotional and social intelligence. Results from analysis of our base model provided support for the hypothesized negative direct effect of Intergenerational Authority on Emotional and Social Intelligence (-.21, p <.05), but not for the hypothesized positive effect of Family Climate on Emotional and Social Intelligence (.17, ns). However, this did not seem a complete explanation, since Intentional Change Theory suggests that positive support from trusted others enhances the kind of change that is necessary to learn leadership skills (Boyatzis, 211

236 2006, 2008). It was only during our post-hoc analysis of the data that a clearer picture emerged. We had observed a relationship between leadership effectiveness and the degree to which next-generation family leaders assume responsibility for their own actions and decisions in our qualitative research. We also noticed a strong correlation between Responsibility and Emotional and Social Intelligence in the correlation matrix for our quantitative data. This led us to add a path between Responsibility and Emotional and Social Intelligence in our revised model. This resulted in what we consider to be some of the more important findings in our study. First, as reported earlier, there was a significant and strong effect of Responsibility on Emotional and Social Intelligence (.74, p <.01). Furthermore, Responsibility explained 55% of the variance in Emotional and Social Intelligence in our model. Family Climate significantly and positively affected Responsibility (.33, p <.01), thus indirectly affecting Emotional and Social Intelligence (.24, p <.01) and Leadership Effectiveness (.16, p <.01). The total effect of Family Climate on Leadership Effectiveness was even greater as discussed below. Second, when the path from Responsibility to Emotional and Social Intelligence was added, the path from Intergenerational Authority to Emotional and Social Intelligence dropped out of significance, suggesting full mediation (Baron & Kenny, 1986). As detailed in the Results section of the paper, we confirmed full mediation (VAF = 1.29) using the Preacher and Hayes approach (Preacher & Hayes, 2004, 2008). These results suggest that a positive family climate increases the likelihood that next-generation family leaders will accept responsibly for their own actions and decisions, which in turn has a positive effect on the development of their emotional and 212

237 social intelligence competencies and leadership effectiveness. A closer look at the data shows that Open Communication (.91, p <.01) is the strongest of the three indicators of Family Climate. Open communication is often cited in the literature as critical to the health of a family business (Poza, 2013), particularly the role it can play in helping the family owners develop a common vision for the business and in effectively resolving conflict. Our research adds to our understanding of the importance of open communication in family firms by demonstrating that, along with the degree to which the senior generation pays attention to the needs of the younger generation and the degree to which the family thinks alike, it fosters the development of leadership skills among nextgeneration family leaders through its positive effects on personal responsibility assumed by next-generation leaders and their development of emotional and social intelligence competencies. On the other hand, the negative effective of Intergenerational Authority, which is the degree to which the senior generation exerts unquestioned authority and sets the rules, on the emotional and social intelligence competencies of the next-generation family leaders (-.21, p <.05) is fully explained by its negative effect on the degree to which next-generation leaders assume responsibility for their own actions and decisions (-.30, p <.01). This makes perfect sense as authoritarian senior leaders are often loath to share decision-making and responsibility with others. What they may not realize is that in failing to encourage next-generation leaders to assume age and experience appropriate responsibility, they are denying them an important opportunity to learn emotional and social intelligence competencies and develop leadership skills. 213

238 The other important influence of emotional and social intelligence in our model is as a mediator of the relationship between Responsibility and the Leadership Effectiveness of next-generation family leaders. As we had hypothesized, the degree to which nextgeneration leaders accept responsibility for their own actions and decisions directly affects their effectiveness as leaders (.21, p <.01). This effect is strongly mediated by Emotional and Social Intelligence (VAF =.70). This suggests that a next-generation leader who demonstrates personal responsibility is viewed by others as an effective leader largely because he or she also exhibits leadership behaviors that reflect emotional and social intelligence competencies. It further suggests that a next-generation leader who assumes responsibility but does not also demonstrate emotional and social intelligence competencies in his or her leadership behavior would not be viewed as an effective leader to the same extent as one who also exhibits emotional and social intelligence skills. Our study confirms the strong relationship between the emotional and social intelligence competencies exhibited in the behavior of a leader and his or her leadership effectiveness that has been shown in other studies and contexts. Our results add to the literature on leadership by demonstrating that in a family business context, family climate can either positively or negatively influence the degree to which next-generation family leaders accept responsibility for their own actions and decisions, which in turn affects their development of emotional and social intelligence and leadership skills. This suggests that business-owning family members would be wise to create a family environment characterized by open communication and appropriate attention to the developmental needs of the younger generation that encourages potential next-generation leaders to assume age and experience appropriate responsibilities. It also suggests that 214

239 senior generation family leaders who find it difficult to delegate responsibility and share authority with next-generation leaders put the future of their family businesses at risk by impeding the development of the skills those next-generation family members need to effectively lead the family business in the future. For next-generation family leaders, our results suggest that they would be wise to find or create ways to gain experience in assuming responsibility, either inside or outside of the family business, even if such opportunities are not provided by the senior generation in their own family firms. Accountability Accountability; the degree to which the next-generation family leaders in our study are held accountable for their actions and decisions by others, hold leadership positions with real responsibility and accountability, and are not shielded from the consequences of his or her actions and decisions; turned out to be one of two major drivers of how engaged the next generation leaders in our study reported themselves to be with their work (.32, p <.01). The other driver of Work Engagement was Family Business Climate, which is discussed below. It is important to understand how we measured Work Engagement in our study to properly interpret our results. We used the Utrecht Work Engagement scale, which measures the positive opposite of burnout at work (Seppälä et al., 2009). In other words, it measures the degree to which the next-generation leaders in our study feel inspired by and are enthusiastic about their job, how much energy their work generates, and how happy they are when working intensely. In our study, it turned out that being held accountable by others positively affected the degree to which next-generation family leaders reported themselves to be engaged with their work. It follows, then, that lack of 215

240 accountability negatively affects work engagement. To some who think that holding others accountable is in some way punitive or risky, our results may seem counterintuitive. This is quite important in a family business context, as our qualitative study suggested that the senior generation in family businesses sometimes seek to shield next generation family leaders from the consequences of their actions and decisions. Perhaps they are concerned that a failure may in some way damage the reputation of the next-generation leader. Or perhaps they are concerned about their own reputations, as was the case for one senior generation leader in our qualitative study. Our study suggests that if the senior generation wants the next-generation family leaders to be positively engaged with their work in the family firm, they would be wise to hold them appropriately accountable for their decisions and actions. Here again our study demonstrates the influence of family climate, as the positive and negative dimensions of family climate explained 22% of the variance in Accountability in our base model. Family Climate had a positive direct effect on Accountability (.23, p <.01) and an indirect effect on Work Engagement (.07, p <.10) through its effect on Accountability. Intergenerational Authority had a negative direct effect on Accountability (-.27, p <.01) and an indirect effect on Work Engagement (-.09, p <.05) through its effect on Accountability. In our revised model, we demonstrated that the effects of Family Climate and Intergenerational Authority on Accountability are fully mediated by Responsibility, which explains 55% of the variance in Accountability. As discussed above, this suggests that the degree to which next-generation family leaders are held accountable is fully explained by the degree to which they accept personal responsibility for their leadership 216

241 behavior. An additional interpretation of this mediation effect is that others in a family business may only hold next-generation leaders accountable to the same extent that they hold themselves accountable by exercising personal responsibility. An implication of this interpretation is that next-generation leaders would be wise to identify others inside or outside of the organization who will give them candid feedback and hold them accountable for their leadership behavior and results. Not only would this provide them with feedback to help them improve performance, but the strong link between Accountability and Work Engagement in our model suggests that it would also help them to more fully enjoy and engage with their work. Family Business Climate The other driver of Work Engagement in our model is Family Business Climate, which positively affected the degree to which the next-generation leaders in our study reported themselves to be engaged with their work (.29, p <.01). In our model, Family Business Climate reflects the organizational culture of the family business itself, and is measured by the extent to which there is clear vision for the business, the degree of trust among colleagues, and the overall positive mood in the organization. As one of the key variables in our model, we hypothesized that Family Business Climate would serve as a mediator between the other independent variables and Leadership Effectiveness and Work Engagement. As pointed out in the results section of our paper, there was no significant direct relationship between Family Business Climate and Leadership Effectiveness, so our study did not support our hypothesis that it would mediate other relationships with Leadership Effectiveness. And while Family Business Climate did not partially or fully mediate relationships between the other variables in our 217

242 model and Work Engagement, it did serve as a mediator through which several other variables indirectly influenced how engaged the next-generation leaders in our study were engaged with their work. Intergenerational Authority, the negative dimension of family climate, had the strongest total effect on Family Business Climate (-.52, p <.01). Its effect on Family Business Climate was negative and was comprised of a reasonably strong direct effect (-.32, p <.01), and indirect effects through Responsibility (-.14, p <.01) and Extrinsic Regulation Social (-.07, p <.01). Responsibility had the strongest direct effect on Family Business Climate (.46, p < 01). The motivations of nextgeneration leaders for working in the family business also affected Family Business Climate, with Introjected Regulation demonstrating a moderately positive effect (.28, p <.01), and Extrinsic Regulation Social exhibiting a moderately negative effect (-.18, p <.05). Finally, Family Climate, the positive dimension of family climate, had a smaller positive indirect effect on Family Business Climate (.15, p <.01) through its direct effect on Responsibility (.33, p <.01). All of these effects together explained 52% of the variance in Family Business Climate in our model, with the other 2% explained by Size of the family business, one of our controls. As a result of their direct and indirect effects on Family Business Climate, Intergenerational Authority had a negative indirect effect (-.15, p <.01), Family Climate had a positive indirect effect (.04, p <.01), Responsibility had a positive indirect effect (.13, p <.01), External Regulation Social had a negative indirect effect (-.05, p <.10), and Introjected Regulation had a positive indirect effect (.08, p <.01) on Work Engagement. 218

243 The fact that Family Business Climate significantly affected the degree to which the next-generation leaders in our study were positively engaged with their work makes perfect sense when one views that result through the lenses of Intentional Change Theory and complexity theory. Those theories suggest that an organizational climate characterized by a clear vision, compassion, trust, and overall positive emotional tone trigger emotions that act as positive attractors in the people who work in such a culture. These positive emotional attractors stimulate the parasympathetic nervous system, which causes people to feel energized, optimistic, calm, engaged, and happy (Boyatzis, 2006, 2008). These feelings are the positive opposite of burnout at work; exactly what we measured as indicators of Work Engagement. So it is easy to understand why there was a significant relationship between Family Business Climate and the degree to which the next generation leaders felt engaged with their work. What was intriguing to us was how many variables in our model significantly affected Family Business Climate. Characteristics of the next-generation leaders themselves had a strong cumulative effect on Family Business Climate. The degree to which the next-generation leaders were perceived by others to accept responsibility for their decisions and actions had the strongest positive effect on Family Business Climate (.46, p <.01). As about half of the next-generation leaders in our matched sample were CEOs and 85% were members of senior management, this result is quite important. It suggests that accepting personal responsibility helps senior leaders in a family firm create a positive work culture, which in turn is likely to create a self-perpetuating system that makes it more likely that others in the organization will also be positively engaged with their work (Boyatzis, 2006; Boyatzis & McKee, 2005). It also suggests that next- 219

244 generation leaders can make their work more personally engaging by accepting responsibility for their own leadership behavior, thus exercising control over their own destiny at work. It was also not surprising to see that next generation leaders who reported that they were motivated to work for the family business because they felt they were expected to do so and would be criticized by other family members if they chose to work elsewhere had a negative effect on Family Business Climate (Extrinsic Motivation Social, -18, p <.05). This is consistent with family business literature on next-generation motivation that suggests that such a normative motivation is likely to have a negative effect on the leader s performance (Sharma et al., 2003; Sharma & Irving, 2004). Our results suggest that such a motivation has a broader effect on the entire organizational climate in a family business, as next-generation leaders who feel pressured by family members to work in the family firm may be less likely to have a clear vision for the business, trust others, or establish an overall positive mood. Others who work in the family enterprise are likely to see that the next-generation leader s heart is really not in it, creating a negative emotional attractor loop (Boyatzis, 2006; Boyatzis & McKee, 2005) that diminishes the entire organizational climate. What was surprising to us was that Introjected Regulation had a positive effect on Family Business Climate (.28, p <.01), and as a result a positive indirect effect on Work Engagement (.08, p <.01). In our model, Introjected Regulation was a second-order factor comprised of the first-order factors Fear of Failure and Succession Pressure. Fear of Failure reflected how strongly the next-generation leaders in our study sought to succeed in the family business in order to avoid the shame of failure. Succession 220

245 Pressure measured the degree to which next-generation leaders felt pressure to be successful successors to parents or other ancestors who founded their family firms. Selfdetermination theory suggests that such motivations are non-self-determined or controlled motivations that derive from external sources but which have been partially internalized creating internal pressure to act out of guilt, compulsion, or to preserve one s self-worth (Deci & Ryan, 1985). We had expected that Introjected Regulation would be negatively associated with Work Engagement. Perhaps in a family business, the desire to live up to the expectations of family members is more strongly internalized by nextgeneration family leaders than would be the case for other external factors, and thus becomes positively motivating. Or perhaps next-generation family leaders with such motivations don t view them as external at all because they chose to be successors rather than feeling pressured to be successors as was the case with Extrinsic Regulation Social. This is one of the areas in which we think additional research is warranted. In analyzing the variables that determine Family Business Climate in our model, once again we see the influence of the positive and negative dimensions of family climate. Intergenerational Authority in particular has a strong negative total effect on Family Business Climate (-.52, p <.01). So we can see that when the senior generation leaders in a family firm set all the rules and exercise unquestioned authority, not only does it have a negative effect on the development of the next-generation family leaders in the business, but it has a negative effect on the climate of the entire organization. On the other hand, Family Climate (positive dimension) has a positive indirect effect on Family Business Climate (.15, p <.01). 221

246 We think our results for Family Business Climate and its effect on the degree to which next-generation family leaders are engaged with their work are intriguing. Three of the key variables that determine Family Business Climate are related to the characteristics of the next-generation leaders themselves, Responsibility and two motivational factors, Introjected Regulation and External Regulation Social. This suggests that to a large degree, next-generation family leaders influence one of the factors (Family Business Climate) that significantly affects their own level of positive engagement with their work. In other words, they have a great deal of control over their own destiny at work. They can improve the level of energy and happiness they derive from their work by assuming responsibly for their own actions and decisions, and by working to be successful successors to family leaders who preceded them in the business. On the other hand, if their motivation to work in the family business is driven by external pressure from other family members, unless they find a way to become more internally motivated, then they may be better off to find work that is more meaningful to them outside of the family firm. The lesson for the senior generation is equally powerful since Intergenerational Authority has such a significant effect on Family Business Climate. If they truly hope for next-generation family members to become positively engaged with their work, they would be wise to involve them in age and experience appropriate decision making and power-sharing, and establish a pattern of open communication. Internal Motivation Internal Motivation, the second order factor in our model reflecting the first order factors Purpose and Career Fulfillment, had a positive and significant effect on the 222

247 Leadership Effectiveness of the next-generation family leaders in our study, although it was not as strong as we expected (.14, p <.05). It reflects the degree to which the nextgeneration leaders were motivated to work in the family business in order to fulfill their own career plans and life goals, the degree to which working in the family firms aligned with their personal values and made them feel proud, and the moments of joy they experience at work. These motivations are ones that self-determined theory identifies as self-directed or autonomous and relate positively to individuals optimal functioning (Deci & Ryan, 1985). What was compelling in our study was the relatively strong effect of Family Climate on Internal Motivation (.39, p <.01). This suggests that business owning families who want to help next-generation leaders achieve optimal well-being and performance would be wise to establish a family climate characterized by open communication and senior generation attention to the needs of the next-generation family members. Responsibility The somewhat surprising result in our study was the extent to which Responsibility emerged as such a central construct in our study, strongly affecting the major drivers of both Leadership Effectiveness and Work Engagement. The degree to which next-generation leaders accept responsibility for their own actions and decisions explained most of the variance in Emotional and Social Intelligence (R² =.55), Accountability (R² =.55) and Family Business Climate (R² =.47 if Responsibility is modeled as the only independent variable), which in turn were the major drivers of Leadership Effectiveness and Engagement with Work. And as discussed earlier in the paper, both the positive and negative dimensions of family climate significantly affect the 223

248 degree to which next-generation leaders accept responsibility for their own leadership behavior. The implication of this key finding is that business-owning families that want to foster the development of effective and highly engaged next generation family leaders should focus on creating a family environment characterized by open communication; efforts to develop shared values, interests, attitudes, and beliefs; and senior generation interest in, responsiveness to, and active concern and support for the activities, welfare, goals, needs, and concerns of the younger generation. See Table 34 for a summary of the total effects of Responsibility on other key constructs in our model. Table 34. Total Effects of Responsibility Path Path Coefficient Standard Deviation t Value Significance Level RESP -> ACCT *** RESP -> ESI *** RESP -> FBC *** RESP -> LEV *** RESP -> UWE *** ***p <.01 Controls We controlled for age of the next-generation leaders in our study, as well as for the size of the family firms represented. Age had significant direct effects on Accountability (.25, p <.01) and Leadership Effectiveness (.15, p <.01). Age also had an indirect effect (.08, p <.05) on Work Engagement through its direct effect on Accountability. These results suggest that next-generation leaders learn skills that improve their effectiveness as leaders as they gain experience over time. This is important because it provides additional confirmation that leadership skills can be learned. 224

249 The results also imply that older next-generation leaders are held more accountable by others and are more engaged with their work than younger leaders. Being held more accountable may be partly a function of level of responsibility, as older leaders are likely to hold higher management positions than younger leaders. Or it could simply mean that more is expected of older, more experienced next-generation leaders. The indirect effect of Age on Work Engagement is consistent with our other results that show that being held accountable positively affects engagement with work. Perhaps one way to encourage future family leaders to stay with the family firm through greater engagement with their work is by holding them more accountable earlier in their careers. Size of the family business was significantly related to Family Business Climate (.16, p <.05), which measured organizational vision, compassion, and overall positive mood. This finding may have a number of important implications. It may be that larger family firms simply have more structures and processes in place to create and communicate a clear vision and strategy for the business. It is also logical to think that more people are involved in the creation of vision and strategy in a larger business, thus enhancing organizational climate as those involved with strategic decision making feel more committed to the goals of the business. Some may find it surprising that those working in larger family firms also indicated higher levels of compassion and positive mood in their organizations than was the case for those working in smaller family firms. Perhaps the structures and processes of a larger family firm also create more opportunities to communicate with colleagues, thus building trust and positive relationships. While all of these are possibilities, we think the more likely reason is that family firms that take the time to develop and communicate a clear vision for the 225

250 business and create an overall positive mood characterized by trust are more likely to grow than those that neglect these critical leadership tasks (Boyatzis, 2006; Boyatzis & Soler, 2012). Limitations and Future Research A limitation of our study is that participants did not comprise a strictly random sample, although a relatively wide variety of next generation leaders in terms of age, family generation, and family firm size are represented. In addition, the next-generation leaders included in the study participated voluntarily, so they were self-selected. They also nominated their own multi-raters, which introduces the possibility that they chose people more likely to rate their leadership effectiveness favorably, although this is a risk of most 360-degree leadership surveys. Also notable was that of the 85 next-generation leaders who took the time to fill out the rather lengthy questionnaire but for whom we did not receive enough multi-raters to include in the final data set, many did not provide any multi-raters at all. This suggests the possibility that after being exposed to the kinds of questions the multi-raters would be answering about their leadership practices, some next-generation leaders did not provide multi-raters because they were concerned about how they might be rated, even though we made it clear that the surveys were strictly confidential. This also introduces the possibility of upward-rating bias among multiraters. Nonetheless, there was sufficient variation in multi-rater evaluations to give us confidence in the reliability of our results. Our results suggest a number of interesting possibilities for further research. While we learned a great deal about how family climate, personal responsibility, and emotional and social intelligence competencies influence the leadership effectiveness of 226

251 next-generation leaders from our study, we would like to know more about the types and nature of experiences that help next-generation family leaders learn leadership skills. A follow-up study on specific experiences that result in the development of emotional and social intelligence competencies in a family business context would be theoretically meaningful and useful for family business practitioners. Because we did not include next-generation leader self-assessments of leadership behaviors in our analysis, another meaningful follow-up study would be an analysis comparing self-ratings with multi-rater assessments for each next-generation leader. Self-awareness is a key component of emotional and social intelligence (Boyatzis & McKee, 2005; Goleman et al., 2002), so it would be interesting to learn how leader selfawareness might be influenced by a context in which the leader is also a member of the business-owning family. Because family climate influenced so many of the other variables related to leadership effectiveness and work engagement in our study, further research on specific ways business-owning families create positive family climates characterized by open communication, cognitive cohesion, and intergenerational attention would be useful. Such research might be particularly valuable to entrepreneurs who have built successful businesses they would like to continue through future generations of family ownership. Our research suggests that the fiercely independent authoritative leadership style that is common among many entrepreneurs and may have helped them overcome the enormous challenges of founding or growing a successful business may work against them in preparing the next-generation for leadership responsibilities, which is so crucial to successful succession. 227

252 Conclusion and Implications for Practice There are two major stories in our study. First, our research demonstrates the importance of family climate to the development of effective next-generation family business leaders. Second, the study reveals the impact of the degree to which nextgeneration family business leaders accept responsibility for their own decisions and actions, and are held accountable by others, on their development of leadership skills and the degree to which they are positively engaged with their work. The positive dimensions of family climate had significant total effects on seven of the nine other constructs in our study, including our dependent variables, Leadership Effectiveness and Work Engagement. Intergenerational Authority, the negative dimension of family climate, also had significant total effects on seven constructs, including both dependent variables. The degree to which next-generation leaders assume responsibility for their own decisions and actions was strongly related to their emotional and social intelligence, which in turn was the major diver of their leadership effectiveness. And the degree to which next-generation leaders are held accountable by others was strongly related to how positively engaged they were with their work. Much of the focus in family business research has been on how to engineer the succession process to increase the chances of business success through multiple generations of family ownership, with a particular focus on the business and ownership systems. That research has helped us understand the importance of creating a shared vision for the future of the family business, designing a thoughtful succession process, establishing effective governance, and identifying many of the characteristics of successful next generation family leaders. Our research adds to family business literature 228

253 by demonstrating the importance of what happens in the family system to the development of the skills and characteristics needed by next-generation family members to become effective leaders of the family business. It adds to leadership literature by revealing how the development of emotional and social intelligence competencies known to be drivers of leadership effectiveness is affected by family climate in a family business context. There are strong messages for family business owners in our study as well. It is often the case that the demands of the family business are so great that it seems little time is left for family matters. Our study suggests that working to create a positive family climate characterized by open communication, attention to the needs of the next generation, and cognitive cohesion may be just as important to the survival of the family business through multiple generations of ownership as working to create positive business results. Family business owners would be wise to create a reasonable balance between time and energy focused on the business and time and energy focused on family relationships. Our study also suggests that the rugged independence, decisiveness, and single-minded focus that often seems to serve entrepreneurs so well in building a successful family business, may work against the family business and the family when it comes to preparing next-generation family members for future leadership responsibilities. Our study could not have been clearer in demonstrating that senior generation family leaders who set all the rules and exercise unquestioned authority impede the development of next generation family leaders, and negatively affect the climate of the family business organization as well. Perhaps this is an underlying reason for the low survival rate of family firms from one generation to the next, which research indicates is sometimes due 229

254 to weak next-generation leadership. Senior family business leaders would be wise to provide next-generation family members with age and experience appropriate levels of responsibility and decision-making authority to help them gain early leadership experience, including the risk of failure that can teach valuable leadership lessons. Finally, our study suggests that next-generation family members interested in playing a leadership role in the family business should consider taking responsibility for their own development of leadership skills, particularly emotional and social intelligence competencies. If the family climate is one characterized by intergenerational authority as defined in our study, they would be well served to suggest or create some area of the business for which they could be responsible and held accountable by others. If the senior generation refuses to allow it, then the potential next-generation leader may be wise to seek opportunities to gain experience with genuine responsibility and accountability outside of the family firm. Our research is abundantly clear that real responsibility is strongly related to emotional and social intelligence competencies and that being held accountable is significantly related to positive engagement with one s work. 230

255 CHAPTER IV: DEVELOPING NEXT-GENERATION LEADERSHIP TALENT IN FAMILY BUSINESSES: THE EFFECTS OF SELF-AWARENESS AND LEADERSHIP DEVELOPMENT EXPERIENCES Introduction Family businesses constitute between 80% and 98% of all businesses in the world s free economies, generate 49% of the GDP in the U.S. and more than 75% in most other countries. They employ 80% of the U.S. workforce and more than 75% of the working population globally, and created 86% of all new jobs in the U.S. over the past decade (Poza, 2013). While it is often assumed that all family firms are small, 19% of the companies in the Fortune Global 500, which is comprised of the world s largest firms, are family-controlled, up from 15% in 2005 ( Despite their importance, only 30% of family businesses survive from the first to the second generation of family ownership, only 12% survive from the second generation to the third, and only 4% survive from the third generation to the fourth (Poza, 2013). In surveys of family business owners, noted family business expert John Ward (1997) found that weak next-generation leadership was one of the top three to threats to long-term family firm success. Well prepared next-generation family leaders who are committed to the vision of the family firm and positively engaged with their work are critical to smooth leadership successions (Handler, 1992; Morris et al., 1997; Sharma & Irving, 2005). Research has also shown that the climate of a business-owning family plays an important role in determining the culture and performance of family firms (Björnberg & Nicholson, 2007; Dyer, 1986) and the likelihood of successful transitions from one generation of leadership to the next (Morris et al., 1997). 231

256 Next-generation leadership of a family enterprise is not an easy task. Nextgeneration family business leaders face a set of challenges unique to family-owned enterprises. Not only must they meet the challenges of sustaining a successful business as any business leader must do, but they must also negotiate the complexities of the family and ownership systems that are integral and overlapping components of family enterprises (Gersick et al., 1997). So how do next-generation family leaders develop the leadership skills they need to be effective stewards of their family enterprises and at the same time, derive positive energy, inspiration and fulfillment from their work in the family firm? What effect does next-generation leader self-awareness have on their ability to learn new leadership behaviors and positively engage with their work in the family firm? While there is general agreement in the family business literature about the importance of nextgeneration leadership and some of the characteristics of successful successors, there is a need for more rigorous research on specific competencies that contribute to nextgeneration family leader effectiveness and the leadership development experiences that can help them learn those skills (Cabrera-Suárez, 2005; Fiegener et al., 1994). To meet that need, this study builds on the findings of an earlier quantitative study that demonstrated the impact of the climate in the business-owning family on the degree to which next-generation family leaders accept responsibility for their own actions and decisions, exhibit emotional and social intelligence competencies in their leadership behavior, and are motivated to work in the family firm, which in turn, predict their leadership effectiveness. That study also showed that family climate influences the climate in the family business itself and the degree which next-generation leaders are 232

257 held accountable by others, which in turn, predict the degree to which they are positively engaged with their work in the family firm. This study digs even deeper by examining how next-generation leader self-awareness and specific leadership development experiences influence their leadership effectiveness and engagement with work. The study uses data generated from surveys of 100 next-generation family leaders of privately-owned family businesses and 350 family and non-family leaders and employees with whom they work, who rated their leadership behaviors using a 360- degree survey instrument. The study results provide empirical evidence that nextgeneration leaders who are provided with challenging work assignments, meaningful mentoring relationships, the right kind of formal training, and opportunities to receive honest feedback on their leadership behaviors are more likely to become self-aware, effective leaders who derive positive energy, inspiration, and fulfillment form their work in the family firm. The paper is organized as follows. First, a review of the literature that informed the development of hypotheses and conceptual models is provided. Detailed descriptions of study design, measurement development, pre-testing, data collection, sample characteristics, and data screening follow. The methods, results, and discussion sections are divided into two parts. Part 1 describes the methods used to test the hypotheses related to the effects of next-generation leader self-awareness on their leadership effectiveness and engagement with work, presents the results of those tests, and provides interpretations of the results. Part 2 follows the same sequence of procedures in examining the effects of leadership development experiences on next-generation leader effectiveness and engagement with work in the family firm. The paper continues with a 233

258 discussion of study limitations and suggestions for future research, and closes with a summary of top-line conclusions and implications for family business practice and nextgeneration leader development. Theoretical Foundation, Hypothesis Development, and Conceptual Models Effective Leadership Leadership is a complex and multi-dimensional concept. In his meta-analysis of leadership studies, Wren (2006) identified no less than 53 approaches to leadership research, all with their own nuanced definitions of effective leadership. Emotional and social intelligence, full-range leadership, authentic leadership, and leader-member exchange are several of the leading contemporary theories of leadership. Emotional and social intelligence refers to leadership behaviors that reflect selfawareness, self-management, social awareness, and relationship management (Goleman et al., 2002), and is more fully described late in the paper. Studies have shown that as much as 90% of a leader s effectiveness is determined by his/her emotional and social intelligence (Cherniss & Adler, 2000). Full-range leadership theory includes transformational, transactional, and laissezfaire leadership (Antonakis et al., 2003; Bass, 1985). Transformational leadership inspires followers through charisma; a strong commitment to values, beliefs, and mission; the ability to communicate an inspirational vision of the future; intellectual stimulation; and individualized attention to the interests and needs of followers. Transactional leadership motivates follower compliance through promises, praise, and/or rewards; and corrects non-compliance with negative feedback, reproof, threats, and/or disciplinary actions (Bass & Steidlmeier, 1999). Laissez-faire leadership refers to a leader s active 234

259 choice to avoid responsibility, decision-making, and the exercise of authority (Antonakis et al., 2003). While situational in nature, transformational leadership has been found to be generally more effective than transactional leadership, with laissez-faire leadership the least effective of the three (Antonakis et al., 2003). Bass and Steidlmeier (1999) add a moral dimension to full-range leadership characteristics in defining authentic leadership, which seeks to differentiate charismatic leaders who produce positive results for the organizations they lead from those who use the same characteristics to manipulate followers for their own selfish ambitions. Avolio, Walumbwa, and Weber (2009) provide a more comprehensive definition of authentic leadership that includes objectively reviewing relevant data and considering multiple perspectives before making a decision, self-regulated behavior guided by an internal moral compass, relational transparency characterized by open communication of one s true thoughts; internal control of inappropriate expressions of emotion; and selfawareness. Research has demonstrated that leaders who exhibit authentic leadership behavior are perceived as more effective than those who do not (Avolio & Gardner, 2005). The leader-member exchange (LMX) theory of leadership takes a relationshipbased approach in defining leadership. While the other leadership theories outlined above focus exclusively on leaders, LMX theory also considers followers and the nature of the relationships between leaders and followers. The central concept in LMX is that effective leadership processes are the result of mature relationships between leaders and followers who partner to pursue common goals (Graen & Uhl-Bien, 1995). 235

260 While a comprehensive definition of leadership remains elusive, the major leadership theories suggest that true leadership talent involves the ability to persuade followers to suspend their purely selfish interests to support and work toward a common good (Hogan & Kaiser, 2005). Boyatzis and McKee (2005) refer to leaders with that kind of talent as resonant leaders, those who have demonstrated that they are able to blend financial, human, intellectual, environmental, and social capital to create positive results and competitive advantage for their organizations. The literature demonstrates that effective leadership is central to the success of any business, family-controlled or not. In his study of the highly successful turnaround companies featured in Good to Great, Collins (2001) discovered that those companies selected a new CEO first, then adopted a winning strategy developed and executed by that CEO and his/her team, rather than the other way around. Collins refers to these highly effective leaders as Level 5 leaders, who in addition to exhibiting the resonant leadership characteristics identified by Boyatzis and McKee (2005), were modest, humble, and phenomenally persistent. Noted family business expert John Ward (1997) emphasizes how important effective leadership is to the sustainable growth of a family enterprise, which often determines a family firm s ability to survive through multiple generations of family ownership. Handler found that next-generation leadership is as important to long-term family firm survival as the contributions of the founder in establishing the business (Handler, 1992). The leadership effectiveness of nextgeneration family firm leaders who are members of the business-owning family is one of two dependent variables in the study s conceptual model, and the one of primary interest. 236

261 Emotional and Social Intelligence How intelligently leaders identify, understand, and manage their own emotions, and the emotions of those with whom they interact, determines the effectiveness of their leadership behavior and the quality of the relationships they create (Goleman et al., 2002). While technical skills are important to job performance at all levels, when it comes to leadership, research has demonstrated that as much as 90% of a leader s effectiveness is determined by emotional and social intelligence (Cherniss & Adler, 2000). Goleman, Boyatzis, and McKee (2002) identify four domains of emotional and social intelligence: self-awareness, self-management, social awareness, and relationship management; and 19 specific competencies associated with the expression of emotional and social intelligence (see Appendix A). While it is often assumed that soft-skills like emotional and social intelligence competencies are innate or fixed in early childhood, they can in fact be learned (Cherniss & Adler, 2000; Goleman et al., 2002). Reading, lectures, or seminars can help leaders understand emotional and social intelligence concepts, but actually learning emotional and social intelligence skills requires impactful experiential learning (Boyatzis & McKee, 2005; Cherniss & Adler, 2000; Goleman et al., 2002). It has also been found that a boss who models effective emotional and social intelligence skills reinforces the same behavior in his/her subordinates and helps them learn and practice emotional and social intelligence skills (Manz & Sims, 1986; Weiss, 1977). The Goleman, Boyatzis, McKee (2002) definition of emotional and social intelligence belongs to a stream of research on emotional intelligence referred to as 237

262 behavioral (Boyatzis, Gaskin, & Wei, 2014) or mixed model (O'Boyle et al., 2011). Mixed model definitions of emotional intelligence are broader than those used in abilitybased models or self-report measures, the other primary streams of emotional intelligence research, because they include social skill measures as well as emotional intelligence measures (O'Boyle et al., 2011). Mixed model measures of emotional and social intelligence have been shown to be highly predictive of job performance and to have incremental validity above and beyond cognitive ability and the Five Factor Model of personality traits (O'Boyle et al., 2011). This study relies on the Goleman, Boyatzis, McKee definition of emotional and social intelligence and uses the Emotional and Social Competency Inventory University Edition (Boyatzis & Goleman, 2007), one of the most widely accepted 360 instruments to measure next-generation family firm leader behaviors reflective of emotional and social intelligence competencies. Studies have demonstrated that there is often a meaningful difference between self and other ratings on the Emotional and Social Intelligence Competence Inventory, and that self-ratings alone do not provide valid and reliable measures of emotional and social intelligence for research purposes (Wolff, 2005). As a result, self-ratings are usually excluded from data analysis by researchers (Boyatzis, Gaskin, and Wei in Goldstein et al., 2014), as observer ratings have been shown to be more reliable indicators of leadership effectiveness. Studies comparing self-other ratings in a wide variety of 360 -type instruments show that individuals are not very good judges of how others perceive their leadership behaviors (Tsui & Ohlott, 1988). Self-assessments of leadership behaviors are sometimes inflated, unreliable, and biased (Mabe & West, 1982; Podsakoff & Organ, 238

263 1986; Taylor, 2014), sometimes times lower than others ratings, and sometimes in agreement with others evaluations (Atwater & Yammarino, 1992; Fleenor et al., 1997; Van Velsor et al., 1993). Next-generation leaders of family firms who are also members of the business-owning family often do not receive accurate feedback on their leadership behaviors (Poza, 2013), suggesting that it is even less likely that next-generation family leaders of family firms will have accurate self-perceptions than leaders in general. Consequently, the study results are expected to show that observer ratings of nextgeneration leader emotional and social intelligence competencies will predict their leadership effectiveness but self-assessments will not, and the following hypotheses are advanced: Hypothesis 1. Next-generation family firm leader self-ratings of leadership behaviors reflective of emotional and social intelligence competencies do not predict their leadership effectiveness. Hypothesis 2. Observer ratings of next-generation family firm leader behaviors reflective of emotional and social intelligence competencies predict nextgeneration leader leadership effectiveness. Work Engagement Work Engagement is the positive opposite of burnout and has been identified in studies of positive psychology as a central element of well-being at work (Seppälä et al., 2009). It can be described as a positive, fulfilling, work-related state of mind that is characterized by vigor, dedication, and absorption (Schaufeli et al., 2002). Nextgeneration leaders who are more committed to the business, a key to its long-term survival and success (Miller & Breton Miller, 2006), are more likely to demonstrate behavior above and beyond what is required by their job description (Dawson et al., 2013), demonstrating a high level of engagement with their work in the family firm. This 239

264 study explores the effect of next-generation family leader self-assessment of leadership behaviors reflective of emotional and social intelligence competencies on their engagement with work, the study s second dependent variable. A number of recent studies have shown that self-efficacy is specifically related to work engagement (Mauno, Kinnunen, & Ruokolainen, 2007; Xanthopoulou, Bakker, Demerouti, & Schaufeli, 2007), and that self-perception of leadership behaviors is reflective of self-efficacy. The literature also suggests that leaders with higher levels of emotional and social intelligence are less likely to experience burnout, the polar opposite of engagement with work (Schaufeli & Bakker, 2003). They are also more likely to engage in work that is well aligned with their values, thus generating an enormous amount of energy (Cherniss & Adler, 2000), one of the defining characteristics of work engagement. In addition, a recent study of IT managers and professionals working in a variety of companies (Pittenger, 2012) demonstrated that self-rated emotional and social intelligence competencies predicted engagement with work. Consequently, it is hypothesized that: Hypothesis 3. Next-generation family firm leader self-ratings of leadership behaviors reflective of emotional and social intelligence competencies predict the degree to which they are engaged with their work in the family firm. Self-Awareness Leader self-awareness is typically defined in leadership research as the difference in how leaders perceive their own leadership behaviors and how others with whom they work (direct reports, peers, and supervisors) perceive them. Those differences are most commonly measured by comparing self-other ratings on leadership behaviors using 360 survey instruments. The degree and direction of self-other agreement is associated with a 240

265 variety of individual and organizational outcomes, including leadership effectiveness and career derailment (Fleenor et al., 1997; Fleenor, Smither, Atwater, Braddy, & Sturm, 2010; McCall & Lombardo, 1990). Highly effective leaders are aware of their strengths and weaknesses and are motivated to improve (Boyatzis & McKee, 2005; Cherniss & Adler, 2000). This suggests that less self-aware leaders are likely to exhibit effective leadership behaviors and be less engaged with their work. Leaders who overrate their leadership behaviors relative to their observers have been found to be rated lower on effectiveness by their subordinates compared to leaders who underrate their leadership behaviors (Van Velsor et al., 1993). Leaders whose self-ratings are more closely aligned with their observers ratings have been found to have higher performance (Atwater & Yammarino, 1992). In addition, the most effective leaders are often modest and humble (Collins, 2001; Hogan & Kaiser, 2005), suggesting that they are more likely to underrate their leadership behaviors than less effective leaders. The literature suggests that next-generation leader lack of self-awareness will negatively affect their leadership effectiveness and engagement with work. It further suggests that more effective leaders will tend to underrate and less effective leaders will tend to overrate their leadership behaviors. Consequently, the following hypotheses are advanced: Hypothesis 4. More effective next-generation family firm leaders rate themselves lower and less effective leaders rate themselves higher on leadership behaviors reflective of emotional and social intelligence competencies than their observers rate them. Hypothesis 5. Lack of next-generation family firm leader self-awareness of their leadership behaviors negatively affects their leadership effectiveness. 241

266 Hypothesis 6. Lack of next-generation family firm leader self-awareness of their leadership behaviors negatively affects their engagement with work. Family Climate Family climate has a strong effect on family business culture and performance and is what makes family-owned businesses different from public and non-family privately owned firms (Björnberg & Nicholson, 2007). Björnberg and Nicholson (2007) identify three broad categories that define family climate, each of which have two dimensions: (a) family intergenerational style, (b) family cohesion, and (c) family process. Family intergenerational style refers to the degree of authority exercised by the senior generation and to how much time and attention they devote to the younger generation. In a family business context, it refers to the intergenerational style of all senior family members who exercise authority in the family firm, which may include family members other than parents. An intergenerational style that is over-controlling and oppressive may meet with resistance and rebellion from younger family members (Walsh, 2003) creating conflict that inhibits the next generation s ability to differentiate themselves (Kerr, 1988) and develop leadership skills. On the other hand, an intergenerational style that involves paying adequate attention to the developmental needs of the younger generation fosters healthy family functioning (Björnberg & Nicholson, 2007). Family cohesion is comprised of cognitive and emotional cohesion. Cognitive cohesion refers to the degree to which family members share worldviews, norms, and values. Cognitive cohesion influences the leadership culture of the family firm and can 242

267 be used to create competitive advantage through what Habbershon and Williams (1999) identify as the familiness of a family enterprise. Emotional cohesion refers to the emotional bonds among family members. Emotional cohesion contributes to positive family relationships, but too much emotional cohesion can become dysfunctional, leading to a family system that is rigid and enmeshed (Beavers & Voeller, 1983). Lack of sufficient cognitive or emotional cohesion often leads to destructive conflicts that put the functioning of the family and the business at risk. Family process refers to the degree of open communication and adaptability in the family system. Open communication is viewed by family business researchers as a central characteristic of well-functioning family and family business systems (Gersick et al., 1997; Poza, 2013; Ward, 2004b). Adaptability is critical to the family s ability to make strategic shifts in the business in response to changes in the external environment (Walsh, 2003). Research on conflict style in family firms demonstrates the importance of how families face challenges when working and living together, particularly when those challenges create strain on family relationships (Danes et al., 2000). A family s conflict style is influenced by how its members communicate and its receptivity and adaptability to change (Björnberg & Nicholson, 2007). Björnberg and Nicholson s (2007) components of family climate interact to influence how well the family system functions. Two of their six dimensions, open communication and intergenerational authority seem most likely to influence the development of self-awareness among the next-generation leaders in the family firm. As pointed out earlier, next-generation leaders in family firms are often denied the opportunity of candid feedback on their performance (Poza, 2013), thus handicapping 243

268 their ability to learn from positive and negative reactions to their leadership behaviors. It is logical to think that open, frank, and transparent communication in the businessowning family would provide next-generation family members with the kind of constructive feedback they need to develop self-awareness. On other hand, a senior generation that exercises unquestioned authority and sets all the rules seems likely to create an environment that would stifle the development of self-awareness among nextgeneration family leaders by denying them valuable opportunities to succeed and fail on their own. Consequently, it is hypothesized that: Hypothesis 7. A family climate characterized by open communication in the business-owning family positively affects the degree to which next-generation family firm leaders exhibit self-awareness of their leadership behaviors. Hypothesis 8. A family climate characterized by a senior generation in the business owning family that sets all the rules and exercises unquestioned authority negatively affects the degree to which next-generation family firm leaders exhibit self-awareness of their leadership behaviors. Figure 20. Part 1 Conceptual Model: Effects of Next-Generation Leader Self- Awareness on Leadership Effectiveness and Work Engagement 244

269 Experiential Development Based on their landmark study of nearly 200 managers in large corporations, McCall, Lombardo, and Morrison (1988) found that the development of effective leadership talent takes place over a long period of time, ten to twenty years (Kotter, 1982); and that while natural talent helps, the acquisition of leadership skills is more a result of the kinds of experiences leaders have and what they learn from those experiences. They discovered that challenging job assignments that stretch emerging leaders are the most effective teachers of leadership skills. Seven types of job assignments had the greatest effect on the development of the managers in their study: (1) early work experience, (2) first supervisory job, (3) project/task force assignments, (4) line-to-staff switches, (5) starting something from scratch, (6) fix-it turnaround jobs, and (7) leaps in scope (Mccall et al., 1988). The common theme in these job assignments is that they require leaders to learn and exercise new leadership behaviors to successfully negotiate challenges that are outside their comfort zones. When executives in the McCall, Lombardo, and Morrison study (1988) reflected on these kinds of experiences, they identified five categories of lessons learned: (1) setting and implementing agendas, (2) handling relationships, (3) adopting basic values and guiding principles, (4) developing an executive temperament, and (5) achieving selfawareness (Lindsey & Homes, 1987). This ability to reflect and extract lessons learned from experiences turns out to be one of the most salient characteristics of effective executives, who actually seek out experiences that are rich in opportunities for learning (Mccall et al., 1988). 245

270 The lessons learned reported by participants in the McCall, Lombardo, and Morrison study (1988) are similar to the self-awareness, self-management, social awareness, and relationship management dimensions of emotional and social intelligence, which was such a strong predictor of leadership effectiveness (.67, p <.01) in an earlier quantitative study of next-generation family leaders (Miller, 2014). The literature on emotional and social intelligence demonstrates that leaders learn emotional and social intelligence competencies through experience. Because developing emotional and social intelligence involves the older, preverbal areas of the brain, leaders must have concrete, active experiences and engage in new patterns of feelings and thoughts to reprogram the neural circuits connecting the amygdala and neocortex (Cherniss & Adler, 2000). One of the most common recommendations for preparing successful heirs made by family business experts is to encourage next-generation family members to acquire outside work experience before joining the family firm (Danco, 1982; Nelton, 1986; Poza, 2013). The theory is that their results will be more objectively evaluated and directly attributable to their efforts in an outside work setting in which their family name carries no special significance. In addition, noted family business researcher Ernesto Poza concludes from his years of observing family firms that a series of challenging assignments in the family firm helps prepare next-generation family members for leadership responsibilities, particularly if they are clearly responsible and held accountable for results (Poza, 2013). The evidence from family and non-family businesses alike suggests the following hypothesis: Hypothesis 9. The degree to which next-generation family firm leaders have faced and value challenging work experiences has a positive effect on their leadership effectiveness. 246

271 The growing body of research on engagement with work also suggests that challenging work experiences are likely to have a positive effect on next-generation engagement with their work in the family firm. Dedication, one of Schaufeli and Bakker s (2003, 2004) three components of work engagement, is defined in part by a sense of challenge in one s work. Research has also shown that lack of challenging and meaningful work assignments can lead to job stress, which contributes to burnout, the polar opposite of work engagement (Coetzee & De Villiers, 2010). Kahn (1990) theorized that people experience challenging work as more meaningful, which in turn, increases their personal engagement with that work. May, Gilson, and Harter s (2004) empirical study on engagement of the human spirit at work provided support for Kahn s theory. Challenging work that encourages creative expression helps young adults who are in the exploration and establishment phase of their careers develop skills which may lead to greater career satisfaction and engagement (Coetzee & Bergh, 2009). Extending that thinking to next-generation family leaders in family firms, it is hypothesized that: Mentoring Hypothesis 10. The degree to which next-generation family firm leaders have faced and value challenging work experiences has a positive effect on the degree to which they are engaged with their work in the family firm. A mentoring relationship is intense, close, provides both professional and personal support in the interest of furthering the protégé s career (Carden, 1990; Sosik & Godshalk, 2000), and is more intimate and powerful than that of a typical supervisory relationship (Burke et al., 1991). Three specific functions of mentoring have been identified in the literature: (1) a vocational or career function, in which the mentor uses 247

272 his organizational power and influence to advance the protégé s career (Kram, 1988), (2) a psychosocial function, in which the mentor provides emotional support, counseling, acceptance, and guidance directed towards the protégé s personal growth (Kram, 1988), and (3) a role-modeling function (Scandura, 2006) in which a protégé emulates the behavior of a trusted and respected mentor (Gibson & Cordova, 1999). The literature is somewhat contradictory in its assessment of the value of mentoring in leadership development. McCall, Lombardo, and Morrison (1988) found that few experienced executives in their seminal study mentioned a mentoring relationship as a key factor in their most meaningful leadership development experiences. Executives in that study indicated that having a variety of bosses with different styles of leadership was more impactful. Nearly 20 percent of the key events in the careers of the executives who participated in the McCall, Lombardo, and Morrison study involved learning from specific influential individuals, 90% of whom were the participants bosses or others higher in the organizational hierarchy. On the other hand, in his classic book The Seasons of a Man s Life, Levinson (1978) claims that intense mentoring relationships are important to adult development, but explains that such relationships rarely occur at work. Consequently, mentoring may be particularly important to the development of next-generation leaders in family firms as there is overlap between the family and business systems (Gersick et al., 1997), and mentoring relationships could develop in either or both of those systems. Furthermore, next-generation family leaders in family businesses are likely to have much longer tenures in the family firm than the executives in the McCall, Lombardo, and Morrison study (1988), who were primarily executives in 248

273 non-family corporations who changed jobs often, thus providing a longer period of time for mentoring relationships to develop. The results of an earlier qualitative study (Miller, 2012) suggest that mentors and influential bosses are both important to the development of leadership talent among nextgeneration family business leaders. Learning from a mentor or influential boss was an important differentiator between the exceptional and below-average next-generation family leaders in that study, as it was mentioned by 88% of the exceptional leaders but only 14% of the below-average leaders. In this third phase of the integrated study, the relationship between learning from mentors and influential bosses, who may also be family members, on the development of next-generation leaders is explored more fully. The literature and the results of the earlier qualitative study suggest the following hypothesis: Hypothesis 11. Having a mentor, influential boss, and/or family member from whom valuable lessons are learned has a positive effect on next-generation family firm leader effectiveness. A mentoring relationship provides the kind of social support and coaching that has been found to be strongly predictive of engagement with work (Schaufeli & Bakker, 2004). Lack of support from leaders in the organization is a major cause of job stress (Coetzee & De Villiers, 2010), which can lead to burnout, the antithesis of engagement with work. A mentoring relationship can help alleviate job stress by providing tangible and emotional support to the mentee through guidance, recognition, feedback, and active interest in his or her development. The trust and intimacy of mentoring relationships have been found to positively affect mentee self-efficacy, which in turn predicts job satisfaction (Kram, 1988) and engagement with work (Sweetman & Luthans, 2010). A 249

274 study by the Corporate Leadership Council found that mentoring was one of the primary levers for driving work engagement and for promoting learning and development (Corporate Leadership Council, 2004). In their study of work engagement antecedents, Olivier and Rothmann (2007) recommend mentoring as a way to foster work engagement through clarification of human values that add meaning to work (Maslach & Leiter, 2008). Consequently, it is hypothesized that: Hypothesis 12. Having a mentor, influential boss, and/or family member from whom valuable lessons are learned has a positive effect on the degree to which next-generation family firm leaders are engaged with their work in the family firm. Formal Leadership Training, Undergraduate and Graduate Classes Leadership training programs encompass a wide variety of formal internal and external leadership training programs and include such training methodologies as written and video case studies; lectures on conceptual models; discussion groups; observed exercises; survey and verbal feedback from trained observers, fellow participants, and workplace colleagues; practice exercises; simulations; modeling by trainers or video case studies on behavioral competencies; and outdoor adventure or indoor psychological exercises with an emphasis on reflective learning, risk taking, teamwork, and personal life goals (Conger & Benjamin, 1999). These programs generally focus on one of three broad goals: (1) individual preparation and skill development, (2) the socialization of corporate leadership values and vision, and (3) strategic intervention that promotes dialogue and effects change throughout an organization. While past training efforts focused almost exclusively on the individual leader s skill development, the current trend is towards more strategic training with greater focus on the socialization of corporate 250

275 values/vision and strategic intervention intended to create desired organizational change (Conger & Benjamin, 1999). Formal leadership training programs, including university-based programs, are rarely mentioned by managers and executives as critical to their development as leaders (Conger & Benjamin, 1999; Mccall et al., 1988). When executives do identify participation in formal training as a significant leadership development event, they most often mention coursework that they perceive to deal with an issue that is relevant to them at a particularly appropriate time in their career. In the studies conducted by McCall, Lombardo, and Morrison (1988), the programs mentioned were usually voluntary, attended later in the leader s career, focused on general management and business issues or process/self-analysis, and conducted away from the executive s place of work. The biggest payoff of these programs was an increased sense of confidence for the managers, rather than the actual content of the course itself. The executives reported three dimensions of increased confidence: (1) confidence that they were making solid career progress, because they had been selected for a prestigious program, (2) confidence in their own knowledge base, because they discovered that they know more about a particular area of management than they thought they did, and (3) confidence in their own abilities, because they found they compared favorably to other participants in the program. Training programs are not without value, however. In one study, managers indicated that classroom education was of significant value in helping them to articulate a tangible vision, values, and strategy for their organizations (Ready, 1994b). Leadership training can also foster an appreciation for leadership ability and inspire managers to 251

276 develop leadership competencies. It can teach critical skills like problem solving methods, communication skills, negotiation strategies, and brainstorming techniques that are central to the development of leadership capabilities, and it can advance the understanding of an organization s history, vision, values, strategy, and culture (Conger & Benjamin, 1999). Perhaps an overlooked value of formal classroom training is the role it can play when viewed as part of a broader development program that includes experiential development. Dreyfus (2008), for example, found that mangers sometimes mentioned training courses as helpful to their understanding of leadership concepts and the ability to connect those concepts to behavior they observed in the workplace. That study concluded that training programs can serve as turning points in helping leaders move beyond merely possessing a leadership competency to actually using it effectively and regularly. Researchers have also found that university graduate programs fail to adequately train students for the challenges of management and leadership (Mccall et al., 1988). In one study, 73% of MBAs reported that the skills they learned in their programs were used only marginally or not at all. That study concluded that, one learns to be a leader by serving as a leader (Bass & Stogdill, 1990). Beginning managers are typically more comfortable solving problems that require the use of technical skills than those that require people skills (Schein & Schein, 1978). More experienced managers also find classroom training and university-based training programs to be of limited use to their development as leaders (Ready, 1994b). Perhaps this is because university-based programs focus more on teaching technical skills than on developing leadership skills. There are exceptions, however. The Weatherhead School of Management at Case 252

277 Western Reserve University created a program for MBA students using the principles of Intentional Change Theory to help students develop emotional and social intelligence competencies, known to be characteristics of the most effective leaders (Boyatzis & McKee, 2005; Boyatzis & Soler, 2012; Goleman et al., 2002). A longitudinal study that compared students who participated in the course with those who did not found dramatic improvements in self-awareness and self-management skills, ranging from 47% for several cohorts of full-time MBA students to 67% for several groups of part-time MBA students. Improvements on social awareness and relationship management skills ranged from 40% for the part-time MBA students to 75% for the full-time MBA students (Boyatzis, 2008). A follow-up study with two groups of the part-time MBAs conducted two years after they graduated showed that the improvements lasted over time (Wheeler, 2008). Ward (1997) found that most next-generation family business successors are educated about business through unsupervised on-the-job training or through formal coursework at a college or university. He finds that these experiences do an inadequate job of preparing next-generation family members to meet the unique challenges they will face as family business leaders. Ward recommends quality mentoring experiences and participation in creating a common strategic vision for the family business as more effective strategies for developing next-generation leadership talent. He also advocates work experience outside the family business and working with trade associations, civic groups, and charitable not-for-profits to learn how to deal with expectations in the world outside the family firm. 253

278 In an earlier qualitative study (Miller, 2012), most family business leaders (70%) mentioned having participated in some kind of formal or university based business or leadership training, but it was not a strong differentiator between the exceptional and below-average next-generation family leaders who participated in the research. Consequently, formal leadership training is not expected to have a significant effect on the leadership effectiveness of the next-generation leaders in this study. However, because the research indicates that formal leadership training increases leader selfconfidence, which is linked to work engagement (Kram, 1988), it is anticipated that formal leadership training will have a positive effect on the degree to which the nextgeneration leaders in the study are engaged with their work in the family firm. The following hypotheses are advanced: Hypothesis 13. Formal leadership training and undergraduate and graduate classes have no effect on next-generation family firm leader effectiveness. Hypothesis 14. Formal leadership training and undergraduate and graduate classes have a positive effect on the degree to which next-generation family firm leaders are engaged with their work in the family firm. Figure 21. Part 2 Conceptual Model: Effects of Leadership Development Experiences on Next-Generation Leader Effectiveness Work Engagement 254

279 Research Design and Methods Multi-Rater Cross Sectional Design To test the study s hypotheses about how next-generation family firm leader selfratings of emotional and social intelligence competencies predict their leadership effectiveness and engagement with work, how more and less effective leaders differ in their self-assessments, and how family climate influences next-generation leader selfawareness, a quantitative survey was designed to capture the perceptions of a cross section of family and non-family members in each family business that participated in the study. Next-generation family business leaders were defined as leaders at any management level and of any age, who are members of any generation of the businessowning family other than the generation that founded the business. Each next-generation leader who participated in the study filled out a survey and asked three to seven people familiar with his/her leadership practices to fill out a similar survey. The online survey utilized Qualtrics, a popular online survey research platform, and each participant was directed to one of three combinations of questions determined by their classification as a next-generation leader, other family member working in the family business, or a nonfamily leader or employee in the family business. Qualifying questions at the beginning of the survey shown in Appendix F ensured that each participant was directed to the correct set of questions. If someone logged on to the survey site and indicated that they were not associated with a family business, the survey was immediately terminated and no further responses were recorded. Next-generation leaders in each firm answered questions about their own leadership behaviors that reflect emotional and social intelligence competencies, the 255

280 climate of the business-owning family, and the nature of their engagement with their work in the family firm. Other family members and non-family members working in the family firm (the multi-raters ) answered the same questions about the next-generation leader s emotional and social intelligence competencies and a set of questions that assessed their leadership effectiveness. Multi-raters who were members of the businessowning family also responded to the set of questions about family climate. The multi-rater, 360-degreee feature is a key element of the study design as it allows a comparison of next-generation leader self-assessment of leadership behaviors with those of their observers (the multi-raters), thus providing a measure of leader selfawareness. In addition, using different sources to assess key measures is the best ex ante procedure to avoid potential common method bias (Podsakoff et al., 2003). A detailed explanation of research methodology and data analysis procedures follows. See Figure 22 for a flow chart of the process employed. 256

281 Figure 22. Research Methods Flow Chart 360 Multi-Rater Cross Sectional Design Measurement & Questionnaire Development Pre-Testing Data Collection n = 567 Data Screening NGLs and MRs Matched - Data Sets with 2+ MRs Retained (n = 100) Part 1 Data Analysis: Effects of NGL Self- Awareness Part 2 Data Analysis: Effects of NGL Leadership Development Experiences Measurement Model Analysis in SPSS & AMOS Measurement Model Analysis in Smart PLS Common Method Bias Test Common Method Bias Test Summated Scales for NGL & MR ESI Created Collinearity Assessment of Predictor Variables ESI Difference Score Calculated Collinearity Assessment of Predictor Variables H1-3, 5-8 Tests in AMOS SEM Independent Samples t-test for H4 Post-Hoc Analysis 1: Effects of NGL Underrating & Overrating ESI on Leadership Effectiveness Post-Hoc Analysis 2: Effects of Less and More Effective NGL Self-Awareness on Leadership Effectiveness Post-Hoc Analysis 3: Effects of Less and More Effective NGL Self-Awareness on Work Engagement Post-Hoc Analysis 4: Effects of NGL Underrating & Overrating ESI on Work Engagement Calculation of Path Coefficients, R² Values, & t- Values by Bootstrapping 5,000 Samples Calculation of f² Effect Sizes Calculation of Q² Values to Determine Predictive Relevance of SEM Calculation of q² Effect Sizes to Determine Predictive Relevance of Each SEM Path H9-14 Tests in Smart PLS SEM Assessment of Controls Post-Hoc Analysis 1: NGL-Rated Impact of Leadership Development Experiences Post-Hoc Analysis 2: Integration with SEM from First QUAN Study Post-Hoc Analysis 5: Effects of NGL CEO vs. Other Leader Self-Awareness All Smart PLS Analysis Procedures Repeated for Integrated SEM + Evaluation of Total Effects Assessment of Controls 257

282 Measurement Development: Part 1 A literature search identified previously validated scales that were used to operationalize the key constructs in the study, with a few slight modifications in wording to reflect a family business context. Exploratory and confirmatory analyses were conducted to determine how each scale performed in this study. Survey items for Parts 1 and 2 of the study are provided in Appendix F. Emotional and Social Intelligence Emotional and social intelligence, the extent to which the next-generation leader exhibits self-awareness, self-management, social awareness, and relationship management skills, was measured using 44 items from the Emotional and Social Competency Inventory University Edition (Boyatzis & Goleman, 2007). This inventory is a well-established instrument for measuring emotional and social intelligence developed by two of the pioneers of emotional and social intelligence, Richard Boyatzis and Daniel Goleman, and has been validated in multiple contexts (Wolff, 2005). Nine dimensions of emotional and social intelligence were measured (sample items in parentheses): (1) Achievement orientation, the extent to which the leader exhibits initiative, establishes and pursues challenging goals, and seeks to improve organizational and personal performance ( Seeks ways to do things better. ); (2) Adaptability, the extent to which the leader exhibits flexibility in his/her leadership behavior in pursing goals and implementing strategies in the face of changing priorities and/or rapid change ( Adapts to shifting priorities and rapid change. ); (3) Coach and mentor, the extent to which the leader coaches and mentors others by investing time and effort in their development ( Personally invests time and effort in developing others. ); (4) Empathy, the extent to 258

283 which the leader demonstrates an understanding of others perspectives, listens attentively, and puts himself/herself in the other person s shoes ( Understands others by putting self into others shoes. ); (5) Inspirational leadership, the extent to which the leader inspires and brings out the best in others, articulates a compelling vision, and creates a positive emotional tone ( Leads others by creating a positive emotional tone. ); (6) Organizational awareness, the extent to which the leader understands the values and culture of a team or organization and the informal processes by which work gets done ( Understands social networks. ); (7) Pattern recognition, the extent to which a leader perceives patterns or themes in events and uses metaphors or analogies to describe them ( Uses metaphors or analogies to describe themes or patterns. ); (8) Systems thinking, the extent to which the leader sees cause and effect relationships and how they interact ( Sees a situation as multiple cause and effect interactions. ); and (9) Teamwork, the extent to which the leader encourages participation of all team members, encourages cooperation, solicits input, and is supportive and respectful of team members ( Works well in teams by being supportive. ). Emotional and social intelligence behaviors were measured with a five-point Likert-type scale ranging from never shown to consistently shown with a sixth option, don t know, indicating the respondent had not had the opportunity to observe a specific behavior. A number of items were reverse-coded to minimize the effect of response-set bias (Wolff, 2005). Next-generation leader selfreport and multi-rater responses for emotional and social intelligence competency items were coded separately to allow for comparisons between self and multi-rater assessments. 259

284 Family Climate Family climate, the nature of family relationships and whole family functioning, was measured using 16 items from the Family Climate Scales (Björnberg & Nicholson, 2007). This scale was selected as it was specifically designed to measure family climate in a family business context. Two dimensions of family climate were measured: (1) Open communication, the degree to which the family openly and frankly communicates; including listening, showing interest in each other s opinions, and dealing forthrightly with issues of concern; and (2) Intergenerational authority, the degree to which the senior generation sets the parameters of family conduct, including exercising power, setting the rules, and allowing the younger generation to participate in decision making. In their creation of the scales, Björnberg and Nicholson (2007) achieved Cronbach s alphas of.85 for open communication and.75 for intergenerational authority. Family climate items were measured with a five-point Likert-type scale ranging from strongly disagree to strongly agree. A number of items were reverse-coded to minimize the effect of response-set bias (Wolff, 2005). Leadership Effectiveness Leadership effectiveness, the extent to which the next-generation leader is perceived to be effective, was measured using five items from the Leadership Effectiveness scale (Denison et al., 1995). The scale achieved an alpha of.83 in Denison, Hooijberg, and Quinn s (1995) study on behavioral complexity in managerial leadership. The scale was adapted slightly by substituting the word leader for the word manager in several of the items. Leadership effectiveness was measured using a five-point scale with different labeling for the extremes of each item measure. Performance standards 260

285 were measured on a scale with extremes of below most standards and above most standards. Comparison to peers was measured on a scale with extremes of worse leader than peers and better leader than peers. Performance as a role model was measured on a scale with extremes of poor role model and excellent role model. Overall leadership success was measured on a scale with extremes of a leadership failure and a leadership success. Overall effectiveness as a manager was measured on a scale with extremes of ineffective leader and effective leader. Work Engagement Work engagement, a positive, fulfilling, work-related state of mind that is the positive opposite of burnout, was measure using the nine-item version of the Utrecht Work Engagement Scale (Schaufeli & Bakker, 2003). The Utrecht Work Engagement Scale measures three dimensions of work engagement: (1) Vigor, the degree to which the next-generation leader invests energy, effort, and persistence in their work; (2) Dedication, the extent to which the next-generation leader experiences a sense of significance, enthusiasm, inspiration, pride, and challenge in their work; and (3) Absorption, the degree to which the next-generation leader fully concentrates on and becomes deeply engrossed in their work. In an analysis of the construct validity of the nine-item Utrecht Work Engagement Scale using data from five studies (Seppälä et al., 2009), Cronbach s alphas ranged from.81 to.85 for vigor,.83 to.87 for dedication, and.75 to.83 for absorption. Work engagement items were measured using a five-point Likert-type scale ranging from never to consistently. 261

286 Measurement Development: Part 2 For Part 2 of the study, leadership effectiveness and work engagement were measured using the same scales as in Part 1. Unique measures of leadership development experiences were created, as no existing scales that measured leader assessment of the impact of various experiences on their practice of leadership were found. A discussion of how survey questions were developed follows. Exploratory and confirmatory analyses were conducted to create three leadership development constructs. Results of the exploratory and confirmatory analyses are included in the measurement model section for Part 2. Leadership Development Experiences For Part 2 of the study, 20 survey questions were developed to measure the impact of a variety of events and experiences on next-generation leader approach to leadership and management. The questions were based on the results of an earlier qualitative study of next-generation family firm leaders (Miller, 2012) and a landmark qualitative study of leaders from large non-family firms (Mccall et al., 1988). The survey included questions about on-the-job work experiences, formal leadership training, mentoring, good bosses and bad bosses, early leadership experiences, work experience outside the family business, and family council experience. For each event, nextgeneration leaders who participated in the study indicated whether or not they had experienced it, and if so, the degree to which it had led to a lasting change in their approach to leadership and management. Leadership development experiences were rated on a six-point Likert-type scale. Participants rated an event as zero if they had never experienced it, and from one to five to indicate its impact on their practice of 262

287 leadership if they had experienced it; with one indicating not at all important, and five indicating extremely important. The full list of questions is included in Appendix F. Pre-Testing Q-sort Questions from the selected scales were tested using a Q-sort technique following guidelines suggested by Thomas and Watson (2002) to see if those who participated in the Q-sort would group the items in the ways suggested by the scale authors. Q-sort is a powerful and well established technique for quantitatively evaluating opinions and attitudes (Thomas & Watson, 2002). It is particularly helpful in determining if latent constructs used in a quantitative research study are likely to demonstrate convergent and discriminant validity in post-data collection analysis. Q-sort results generally confirmed the groupings of scale items into factors suggested by the scale authors. There was some cross-loading of a few items on the cognitive dimensions of emotional and social intelligence (pattern recognition and systems thinking), but they were minor and did not justify changing or eliminating items or making other changes to the scales. Online Pre-Test of Questionnaire Following the Q-sort, a questionnaire was developed and approval from the Case Western Reserve University Institutional Review Board to proceed with the study was secured. Next, questions were loaded onto the Qualtrics online platform and skip-level logic was employed to ensure that the correct set of questions would be presented to each category of survey respondent. The software was programmed so that each nextgeneration leader who participated in the study could provide addresses for five to seven observers (multi-raters) familiar with their leadership practices. The Qualtrics 263

288 software assigned a unique anonymous code to each potential multi-rater so that their responses could be automatically matched with the next-generation leader they were evaluating. The primary researcher sent invitations to each potential multi-rater with a link to the online survey and instructions that included an assurance that responses would be held in the strictest confidence and that only de-identified aggregate data would be reported in the study. A pilot version of the online questionnaire was tested with a group of 20 BSBA and MBA students from family businesses enrolled in the primary researcher s family business class. The test suggested the need for minor wording changes in a few of the questions to provide greater clarity. A second test was conducted with several business leaders which revealed some minor programming issues with the procedure used to match multi-raters with the correct next-generation leaders and the need to redesign the measurement scale for one set of questions. Those changes were made and the final questionnaire was launched. Data Collection and Sample Data was collected over a four-month period from mid-september 2013 to mid- January Participants were recruited through the primary researcher s personal network of privately-owned family business owners, family business consultants, university-based family business centers, business trade organizations with privately owned family business members, and businesses that provide services to family firms. E- mail invitations were sent to potential participants either directly from the primary researcher or through the individuals and organizations who agreed to help publicize the research project. Some of the organizations who publicized the study provided 264

289 information on the numbers of invitations sent and some did not disclose that information to protect the privacy of their distribution lists. Invitations sent to members of the primary researcher s personal network and to the lists of the organizations that provided the numbers of invitations sent totaled 4,779. An estimated 1,100 invitations were sent to the lists of organizations that did not provide exact numbers. In addition, the primary researcher sent 3,658 invitations directly to multi-raters whose addresses were provided by next-generation leaders who participated in the study, for a total of approximately 9,537 invitations. 866 people responded to the survey for an approximate response rate of 9.1%. After removing unfinished surveys, 586 usable surveys were received. The data was examined and 19 completed surveys that had more than 15% don t know answers or other missing data were removed (Hair Jr et al., 2013), resulting in a full sample size of 567. The full sample included 185 next-generation leaders and 382 multi-raters, 80 of whom were other family members working in the family business and 302 of whom were non-family leaders or employees working in the family firm. A matched data set was created that included only the next-generation leaders for whom at least two multi-rater responses were received. The matched data set included 100 next-generation family firm leaders and 350 multi-raters, resulting in an average of 3.5 multi-raters per next-generation leader. A summary of sample characteristics for individual respondents is shown in Table 35. Sample characteristics for the family firms represented in the survey are shown in Table

290 Table 35. Respondent Sample Characteristics Full Sample Matched Sample Respondent Characteristics NGLs MRs NGLs MRs Number Percent Number Percent Number Percent Number Percent Sample size (n) Gender Male % % % % Female 33 18% 99 26% 19 19% 88 25% Missing 0 0% 3 1% 0 0% 3 1% Age % 14 4% 1 1% 11 3% % 60 16% 28 28% 55 16% % 92 24% 23 23% 84 24% % % 31 31% 97 28% % 90 24% 17 17% 84 24% % 21 5% 0 0% 16 5% Missing 0 0% 3 1% 0 0% 3 1% Generation G1 0 0% 0 0% G % 41 41% G % 32 32% G % 17 17% G % 8 8% Missing 8 4% 2 2% Education Less than high school 0 0% 0 0% 0 0% 0 0% High school/ged 4 2% 29 8% 2 2% 27 8% Some college 11 6% 59 15% 6 6% 53 15% 2-year college degree 7 4% 31 8% 2 2% 28 8% 4-year college degree % % 58 58% % Masters degree 44 24% 86 23% 27 27% 77 22% Doctoral degree (PhD, EdD) 3 2% 1 0% 2 2% 0 0% Professional degree (JD, MD) 6 3% 11 3% 3 3% 11 3% Missing 0 0% 0 0% 0 0% 0 0% Position in Family Business CEO 76 41% 23 6% 51 51% 17 5% Other senior-level management 69 37% % 34 34% % Middle-level management 24 13% 92 24% 10 10% 86 25% Entry-level management 10 5% 19 5% 5 5% 16 5% Non-management position 5 3% 45 12% 0 0% 39 11% Missing 1 1% 2 1% 0 0% 2 1% Family Membership Family member 75 20% 61 17% Non-family member % % Missing 1 0% 1 0% NGL Relationship Immediate supervisor 25 7% 22 6% Senior leader 41 11% 36 10% Direct report % % Other follower 52 14% 45 13% Peer 48 13% 44 13% Other relationship 57 15% 51 15% Missing 8 2% 8 2% Note: NGL = Next-generation family leader; MR = Multi-rater 266

291 Table 36. Family Business Sample Characteristics Family Business Characteristics Sample Size (n) Revenue Full Sample Matched Sample Under $25 million 59 32% 29 29% $25 - $50 million 24 13% 9 9% $51 - $100 million 21 11% 15 15% $101 - $250 million 45 24% 26 26% $251 - $500 million 15 8% 9 9% $500 million % 11 11% Missing 2 1% 1 1% Ownership Privately owned % 99 99% Public, but family controlled 2 1% 0 0% Public 0 0% 0 0% Other form of ownership 2 1% 1 1% Missing 0 0% 0 0% There were no meaningful differences in the characteristics of the multi-raters in the full and matched samples. The next-generation leaders in the matched sample were somewhat older than those in the full sample, with 31% of the next-generation leaders in the matched sample in the age category vs. 22% in the full sample. The matched sample had more even distribution across age categories. There were also more CEOs in our matched sample (51% of respondents) than in the full sample (41% of respondents), which likely reflects the difference in age. In both samples, the majority of nextgeneration leader respondents were in senior-level management positions (85% for the matched sample and 78% for the full sample), suggesting that they have a major influence on their family firms. Virtually all of the family businesses represented in both samples were privately owned. The firms in the matched sample were slightly larger as measured by annual revenue, but the differences in size categories were quite small. 267

292 The approach recommended by Armstrong & Overton (1977a) was used to assess the possibility of non-response bias in the sample by comparing the responses of late responders with earlier responders. The procedure assumes that late responders are more likely to be representative of non-responders than those who respond earlier. A twotailed t-test in Microsoft Excel was conducted to compare the item responses of the last 10% of survey participants with responses for all other respondents. There were significant differences for only 14 of 209 item responses (6.7%) in the two groups, suggesting that non-response bias does not represent a threat for the sample. Data Screening Total missing data was only 1.5%. Missing values were completely at random and were imputed using the mean replacement method. Since Likert-type scales were used outliers were not removed. Several variables exhibited negative skewness and/or kurtosis. Because multivariate analysis assumes normality of data, skewed variables were transformed by squaring or cubing which cured both skewness and kurtosis issues (Hair et al., 2010). All relationships in the model exhibited homoscedasticity and linearity. Data Analysis: Part 1 Measurement Model Analysis: Part 1 Covariance-based structural equation modeling (CB-SEM) using maximum likelihood estimation was used to analyze the data used for testing Hypotheses 1-8, which are propositions about the effects of next-generation leader self-awareness on their leadership effectiveness and engagement with work. CB-SEM is a widely accepted and powerful regression-based technique for testing causal models with multiple constructs 268

293 like those used in the study. CB-SEM allows modeling of abstract concepts reflective of many indicators (observed variables) and enables the estimation of causal networks including direct and indirect effects simultaneously (Lowry & Gaskin, 2014). CB-SEM was particularly well suited for Part 1 of the study because it is based on established theory and uses previously validated and well-developed measures, making it more confirmatory in nature (Gefen, Straub, & Rigdon, 2011; Hair Jr et al., 2013; Lowry & Gaskin, 2014). IBM AMOS , the most current version of the software at the time of the study, was used to create the measurement model and assess relationships among the constructs. To create the most accurate measurement model, separate exploratory and confirmatory factor analyses were conducted for next-generation family leader (NGL) self-ratings and multi-rater (MR) assessments of their emotional and social intelligence competencies (ESI). This was necessary because the responses to ESI survey questions for the two groups resulted in somewhat different factors. The resulting measures of ESI were used to create a measurement model for testing the study s hypotheses about the predictive effects of next-generation and multi-rater assessments of next-generation ESI on their leadership effectiveness. Additional exploratory and confirmatory analyses were conducted for the full data set comprised of self-rated and multi-rater assessments of next-generation leader ESI which was used to compute an ESI difference score for testing the study s hypotheses about the effects of next-generation leader self-awareness. This procedure ensured that the difference score accurately reflected differences in the ways next-generation leaders and their multi-raters answered the same questions regarding 269

294 leadership behaviors reflective of ESI. Results for the exploratory and confirmatory analyses for ESI and for the complete measurement model follow. All exploratory factor analyses were conducted using principal components analysis with Promax rotation, and all scales were judged to be reflective. Principal components analysis was used because the goal was data reduction for prediction purposes, as the number of indicators was very large. Principal components analysis identifies the minimum number of factors necessary to account for the maximum amount of total variance in the variables (Hair et al., 2010). Promax rotation was used because it is an oblique rotation method that is more realistic than orthogonal rotation, as the underlying theoretical dimensions are not assumed to be uncorrelated (Hair et al., 2010). Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Competencies (n = 100) An exploratory factor analysis (EFA) conducted in SPSS identified a very clean three-factor pattern matrix that explained 72% of the total variance in the model. Item communalities ranged from.61 to.85, all well above the acceptable threshold of.50 established for the study (Hair et al., 2010). The Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.85 and the Bartlett's Test of Sphericity was significant (x² = , df = 45, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010). There was only one cross-loading, and it differed from the value of the loading on the primary factor by more than.20, indicating sufficient discriminant validity. Cronbach s alphas for all four factors were well above the.70 threshold 270

295 recommended by Hair, Black, Babin, and Anderson (2010). See Table 37 for a summary of EFA results for the next-generation leader emotional and social intelligence construct. Table 37. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence EFA Results (n = 100) Factor/Construct No. of Items Loadings Cronbach s Alpha Coach and Mentor (NCM) 3.76,.86, Inspirational Leadership 3.92,.85, (NIL) Teamwork (NTW) 4.67,.83,.85, A confirmatory factor analysis (CFA) in AMOS was conducted using information from the exploratory factor analysis. The modification indices were consulted and the error terms of two of the teamwork items were co-varied to improved model fit (Byrne, 2010). All items loaded strongly on their respective factors with standardized coefficients ranging from.66 to.87, well above the minimum threshold of.50 recommended by Hair, Black, Babin, and Anderson (2010). Very good model fit was achieved with CMIN/DF = 1.42, CFI =.97, and RMSEA =.07. Three tests recommended by Fornell and Larker (1981) were used to test for the convergent validity of the factors. As noted above, standardized loadings of all items on their respective factors was greater than.50, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the five factors was greater than.70, indicating internal consistency (Hair et al., 2010). The average variance extracted for three of the four factors was greater than.50, the minimum threshold recommend by Hair, Black, Babin, and Anderson (2010), indicating that the variance captured by each factor was greater than the variance due to measurement error. 271

296 Tests recommended by Fornell and Larker (1981) were also used to demonstrate the discriminant validly of the constructs. Average variance extracted for each construct was greater than its maximum and average shared variances with any other construct in the model, demonstrating the discriminant validity of the constructs. Discriminant validity was further demonstrated by comparing the square root of the average variance extracted for each construct with that construct s highest correlation with any other construct as shown in the correlations matrix in Table 39. In all cases, the square root of average variance extracted for each construct was higher than that construct s correlations with any other construct, confirming discriminant validity. A summary of CFA results is shown in Table 38. The final CFA model for nextgeneration leader self-assessment of emotional and social intelligence competencies is shown in Appendix J. 272

297 Table 38. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence CFA Results Constructs/ Standard Standardized Regression Cronbach's Composite Reliability Average Variance Extracted Maximum Shared Variance Avergae Shared Variance Items Mean Deviation Weights¹ Alpha (CR) (AVE) (MSV) (AVE) Criteria >.50 >.70 >.70 >.50 < AVE < AVE Coach and Mentor (NCM) NCM construct ncm_ ncm_ ncm_ Inspirational Leadership (NIL) NIL construct nil_ nil_ nil_ Teamwork (NTW) NTW construct ntw_ ntw_ ntw_ ntw_ ¹All standardized regression weights significantly different from zero at level (two-tailed). Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 31 CMIN/DF < Carmines & McIver (1981) CFI > Hair et al. (2010:654) RMSEA < Hair et al. (2010:654) Table 39. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Correlations Matrix CR AVE MSV ASV NIL NCM NTW NIL NCM NTW Note: Square roots of AVEs on the diagonals. 273

298 Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence Competencies (n = 100) An exploratory factor analysis (EFA) conducted in SPSS identified a four-factor pattern matrix that explained 79% of the total variance in the model. Item communalities ranged from.61 to.91, all well above the acceptable threshold of.50 established for the study (Hair et al., 2010). The Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.91 and the Bartlett's Test of Sphericity was significant (x² = , df = 153, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010). There were only five cross-loadings, and they all differed from the value of their loadings on their primary factors by more than.20, indicating sufficient discriminant validity. Cronbach s alphas for all four factors were well above the.70 threshold recommended by Hair, Black, Babin, and Anderson (2010). See Table 40 for a summary of EFA results for the next-generation leader emotional and social intelligence construct. Table 40. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence EFA Results Factor/Construct No. of Items Loadings Cronbach s Alpha Adaptability (AD) 3.64,.88, Coach and Mentor (CM) 3.89,.91, Positive Inspirational Team 9.62,.77,.74,.84,.77,.95,.96 Leadership (PETL).81,.82,.87 Organizational Awareness (OA) 3.82,.68, A confirmatory factor analysis (CFA) in AMOS was conducted using information from the exploratory factor analysis. The modification indices were consulted and 274

299 several of the error terms of the positive empathetic teamwork leadership items were covaried to improved model fit (Byrne, 2010). All items loaded strongly on their respective factors with standardized coefficients ranging from.70 to.95, well above the minimum threshold of.50 recommended by Hair, Black, Babin, and Anderson (2010). Excellent model fit was achieved with CMIN/DF = 1.58, CFI =.96, RMSEA =.07. Three tests recommended by Fornell and Larker (1981) were used to test for the convergent validity of the factors. As noted above, standardized loadings of all items on their respective factors was greater than.50, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the five factors was greater than.70, indicating internal consistency (Hair et al., 2010). The average variance extracted for all four factors was greater than.50, the minimum threshold recommend by Hair, Black, Babin, and Anderson (2010), indicating that the variance captured by each factor was greater than the variance due to measurement error. Tests recommended by Fornell and Larker (1981) were also used to demonstrate the discriminant validly of the constructs. Average variance extracted for each construct was greater than its maximum and average shared variances with any other construct in the model, demonstrating the discriminant validity of the constructs. Discriminant validity was further demonstrated by comparing the square root of the average variance extracted for each construct with that construct s highest correlation with any other construct as shown in the correlations matrix in Table 42. In all cases, the square root of average variance extracted for each construct was higher than that construct s correlations with any other construct, confirming discriminant validity. 275

300 A summary of CFA results is shown in Table 41. The final CFA model for nextgeneration leader self-assessment of emotional and social intelligence competencies is shown in Appendix J. Table 41. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence CFA Results Constructs/ Standard Standardized Regression Cronbach's Composite Reliability Average Variance Extracted Maximum Shared Variance Items Mean Deviation Weights¹ Alpha (CR) (AVE) (MSV) (AVE) Criteria >.50 >.70 >.70 >.50 < AVE < AVE Adaptability (AD) AD construct ad_1_cub ad_3_sq ad_ Coach and Mentor (CM) CM construct cm_ cm_ cm_ Organizational Awareness (OA) OA construct oa_ oa_ oa_5_sq Positive Empathetic Team Leadership (PETL) PETL construct emp_ emp_3_sq il_2_sq il_5_sq tw_1_sq tw_2_sq tw_3_sq tw_ tw_5_cub ¹All standardized regression weights significantly different from zero at level (two-tailed). Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 123 CMIN/DF < Carmines & McIver (1981) CFI > Hair et al. (2010:654) RMSEA < Hair et al. (2010:654) Avergae Shared Variance 276

301 Table 42. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence Correlations Matrix CR AVE MSV ASV PETL CM OA AD PETL CM OA AD Note: Square roots of AVEs on the diagonals. Combined Multi-Rater and Self-Assessment of Next-Generation Leader Emotional and Social Intelligence Competencies (n = 567) Because multi rater and next-generation leader self-assessments of nextgeneration leader emotional and social intelligence competencies produced somewhat different measurement models, a combined measurement model of emotional and social intelligence using the entire sample (n=567) was developed. The results from this model were used to calculate difference scores for multi-rater and self-assessments of nextgeneration leader emotional and social intelligence to ensure that they represented differences in responses to the same survey questions. An exploratory factor analysis (EFA) conducted in SPSS for the combined model suggested a four-factor pattern matrix that explained 62% of the total variance in the model. Item communalities ranged from.46 to.77. Communalities for all of the items except for ao_3 (.49) and oa_3 (.46), which were eventually removed during the confirmatory factor analysis, were above the acceptable threshold of.50 established for the study (Hair et al., 2010). The Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.95 and the Bartlett's Test of Sphericity was significant (x² = , df = 351, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the 277

302 minimum conservative value for practical significance (Hair et al., 2010). Cross-loadings differed from the value of item loadings on their primary factors by more than.20, indicating sufficient discriminant validity. Cronbach s alphas for all four factors were well above the.70 threshold recommended by Hair, Black, Babin, and Anderson (2010). See Table 43 for a summary of EFA results for the combined multi-rater and selfassessments of next-generation leader emotional and social intelligence. Table 43. Multi-Rater and Next-Generation Leader Self-Assessments of Emotional and Social Intelligence Combined EFA Results (n = 567) No. Factor/Construct of Items Loadings Cronbach s Alpha Empathetic Teamwork (ETW) 10.76,.83,.79,.52,.58,.57,.92.66,.76,.65,.89 Inspirational Coach & Mentor 7.59,.74,.92,.80,.88,.59,.91 (ICM).56 Cognitive Intelligence (COG) 6.71,.85,.83,.54,.71, Organizational Awareness (OA) 4.72,.75,.76, Next, a confirmatory factor analysis (CFA) in AMOS was conducted using information from the exploratory factor analysis. A four-factor model exhibited good model fit, but demonstrated a discriminant validity issue between empathetic teamwork (ETW) and inspirational coach and mentor (ICM). The emotional and social intelligence scales used in the study were created from inductive studies of behavior anchored to performance criteria which resulted in a circumplex model of competencies. Consequently, it is assumed that some items as well as scales will have a high shared variance with others (Boyatzis & Gaskin, 2010). In this case, however, combining empathetic teamwork (ETW) and inspirational coach and mentor (ICM) into one construct solved the discriminant validity issue and produced good model fit. All items 278

303 loaded strongly on their respective factors with standardized coefficients ranging from.64 to.90, well above the minimum threshold of.50 recommended by Hair, Black, Babin, and Anderson (2010). Good model fit was achieved with CMIN/DF = 2.64, CFI =.96, RMSEA =.05. Cronbach s alphas for the final three constructs were.94 for emotional intelligence (empathetic teamwork combined with inspirational coach and mentor),.81 for cognitive intelligence, and.79 for organizational awareness. Three tests recommended by Fornell and Larker (1981) were used to test for the convergent validity of the factors. As noted above, standardized loadings of all items on their respective factors was greater than.50, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the five factors was greater than.70, indicating internal consistency (Hair et al., 2010). The average variance extracted for all four factors was greater than.50, the minimum threshold recommend by Hair, Black, Babin, and Anderson (2010), indicating that the variance captured by each factor was greater than the variance due to measurement error. Tests recommended by Fornell and Larker (1981) were also used to demonstrate the discriminant validly of the constructs. Average variance extracted for each construct was greater than its maximum and average shared variances with any other construct in the model, demonstrating the discriminant validity of the constructs. Discriminant validity was further demonstrated by comparing the square root of the average variance extracted for each construct with that construct s highest correlation with any other construct as shown in the correlations matrix in Table 45. In all cases, the square root of average variance extracted for each construct was higher than that construct s correlations with any other construct, confirming discriminant validity. 279

304 A summary of CFA results is shown in Table 44. The final CFA model for the combined multi-rater and next-generation leader self-assessments of next-generation leader emotional and social intelligence is shown in Appendix J. Table 44. Multi-Rater and Next-Generation Leader Self-Assessments of Emotional and Social Intelligence CFA Results (n = 567) Constructs/ Standard Standardized Regression Cronbach's Composite Reliability Average Variance Extracted Maximum Shared Variance Items Mean Deviation Weights Alpha (CR) (AVE) (MSV) (AVE) Criteria >.50¹ >.70 >.70 >.50 < AVE < AVE Cognitive Intelligence (COG) COG construct pr_2_ pr_5_ st_2_ st_3_ Emotional Intelligence (EI) EI construct cm_1_ cm_2_ cm_3_ cm_5_ emp_1_ emp_3_ emp_5_ il_1_ il_3_ il_5_ tw_1_ tw_2_ tw_3_ tw_4_ tw_5_ Organizational Awareness (OA) OA construct oa_ oa_ oa_ ¹All standardized regression weights significantly different from zero at level (two-tailed). Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 186 CMIN/DF < Carmines & McIver (1981) CFI > Hair et al. (2010:654) RMSEA < Hair et al. (2010:654) Avergae Shared Variance 280

305 Table 45. Multi-Rater and Next-Generation Leader Self-Assessments of Emotional and Social Intelligence Combined Correlations Matrix CR AVE MSV ASV EI COG OA EI COG OA Note: Square roots of AVEs on the diagonals. Full Measurement Model (n=100) To create the full measurement model, an exploratory factor analysis was conducted using the items intended to measure intergenerational authority (IAut), leadership effectiveness (LEV), open communication (OC), and work engagement (UWE). Responses for all items were matched with the next-generation leader to whom they referred. Next-generation leader and multi-rater responses for the two family climate scales were averaged to create one score for open communication and one score for intergenerational authority for each next-generation leader s family. Leadership effectiveness questions were answered exclusively by the multi-raters, so their scores were also matched with the appropriate next-generation leader and averaged to create one score per next-generation leader. Work engagement items were only answered by nextgeneration leaders so there was no need to combine them with scores from other survey participants. The exploratory factor analysis (EFA) conducted in SPSS identified a four-factor pattern matrix that explained 70% of the total variance in the model. Item communalities ranged from.33 to.89, with all well above the acceptable threshold of.50 established for the study (Hair et al., 2010) except for uwe 6 (.33), which was retained as it loaded acceptably (.58) on its factor with no cross-loading. The Kaiser-Meyer-Olkin Measure of 281

306 Sampling Adequacy (KMO) value was.84 and the Bartlett's Test of Sphericity was significant (x² = , df = 231, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010). There were only two cross-loadings, and they differed from the value of their loadings on their primary factors by more than.20, indicating sufficient discriminant validity. Cronbach s alphas for all four factors were well above the.70 threshold recommended by Hair, Black, Babin, and Anderson (2010). See Table 46 for a summary of EFA results for the intergenerational authority, leadership effectiveness, open communication, and work engagement constructs. Table 46. Intergenerational Authority, Leadership Effectiveness, Open Communication, and Work EFA Results (n = 100) Factor/Construct No. of Items Loadings Cronbach s Alpha Intergenerational Authority 3.82,.82, (IAut) Leadership Effectiveness 5.96,.91,.86,.91, (LEV) Open Communication (OC) 7.84,.78,.77,.85,.76,.78, Work Engagement (UWE) 7.85,.78,.83,.84,.73,.58, Next, a confirmatory factor analysis was conducted for the full measurement model using all of the factors identified in the preceding exploratory and confirmatory analyses. The modification indices were consulted and several error terms of items loading on the same construct were co-varied to improved model fit (Byrne, 2010). All items loaded significantly on their respective factors with standardized coefficients 282

307 ranging from.52 to.95, all above the minimum threshold of.50 recommended by Hair, Black, Babin, and Anderson (2010) and most well above.70. Good model fit was achieved with CMIN/DF = 1.38, CFI =.92, RMSEA =.06. Three tests recommended by Fornell and Larker (1981) were used to test for the convergent validity of the factors. As noted above, standardized loadings of all items on their respective factors was greater than.50, demonstrating item reliability (Hair et al., 2010). Composite reliability for each of the five factors was greater than.70, indicating internal consistency (Hair et al., 2010). The average variance extracted for all four factors was greater than.50, the minimum threshold recommend by Hair, Black, Babin, and Anderson (2010), indicating that the variance captured by each factor was greater than the variance due to measurement error. Tests recommended by Fornell and Larker (1981) were also used to demonstrate the discriminant validly of the constructs. Average variance extracted for each construct was greater than its maximum and average shared variances with any other construct in the model, demonstrating the discriminant validity of the constructs. Discriminant validity was further demonstrated by comparing the square root of the average variance extracted for each construct with that construct s highest correlation with any other construct as shown in the correlations matrix in Table 48. In all cases, the square root of average variance extracted for each construct was higher than that construct s correlations with any other construct, confirming discriminant validity. A summary of CFA results is shown in Table 47. The final CFA model for nextgeneration leader self-assessment of emotional and social intelligence competencies is shown in Appendix J. 283

308 Table 47. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Full Measurement Model CFA Results (n = 100) Constructs/ Standard Standardized Regression Cronbach's Composite Reliability Average Variance Extracted Maximum Shared Variance Avergae Shared Variance Items Mean Deviation Weights¹ Alpha (CR) (AVE) (MSV) (AVE) Criteria >.50 >.70 >.70 >.50 < AVE < AVE Engagement With Work (UWE) UWE construct uwe_ uwe_ uwe_3_sq uwe_ uwe_5_sq uwe_ uwe_7_cub Leadership Effectiveness (LEV) LEV construct lev_1_sq lev_ lev_3_sq lev_4_sq lev_5_sq Multi-Rater Emotional and Social Intelligence Constructs Adaptability (AD) AD construct ad_1_cub ad_3_sq ad_ Coach and Mentor (CM) CM construct cm_ cm_ cm_ Organizational Awareness (OA) OA construct oa_ oa_ oa_5_sq Positive Empathetic Team Leadership (PETL) PETL construct emp_ emp_3_sq il_2_sq il_5_sq tw_1_sq tw_2_sq tw_3_sq tw_ tw_5_cub

309 Table 47 (continued) Constructs/ Standard Standardized Regression Cronbach's Composite Reliability Average Variance Extracted Maximum Shared Variance Avergae Shared Variance Items Mean Deviation Weights¹ Alpha (CR) (AVE) (MSV) (AVE) Criteria >.50 >.70 >.70 >.50 < AVE < AVE Next-Generation Leader Self-Rated Emotional and Social Intelligence (NESI) NESI Construct Coach and Mentor (NCM) NCM construct ncm_ ncm_ ncm_ Inspirational Leadership (NIL) NIL construct nil_ nil_ nil_ Teamwork (NTW) NTW construct ntw_ ntw_ ntw_ ntw_ Open Communication (OC) OC construct oc_ oc_2_sq oc_ oc_4_sq oc_6_sq oc_7_sq oc_ ¹All standardized regression weights significantly different from zero at level (two-tailed). Model Fit Statistic Threshold Results Reference Chi Square Degrees of Freedom 699 CMIN/DF < Carmines & McIver (1981) CFI > Hair et al. (2010:654) RMSEA (LO 90 - HI 90) < Hair et al. (2010:654) 285

310 Table 48. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Full Measurement Model Correlations Matrix CR AVE MSV ASV AD NESI LEV CM OA PETL UWE OC AD NESI LEV CM OA PETL UWE OC Note: Square roots of AVEs on the diagonals. Test for Common Method Bias A test for common method bias was conducted by adding a common latent factor to the full measurement model and comparing standardized regression weights of factor loadings with and without the common latent factor, following the procedure recommended by Podsakoff, MacKenzie, Lee, and Podsakoff (2003). Differences in factor loadings in the models with and without the common latent factor were all significantly less than.20, indicating no meaningful common method bias. Results of the test are shown in Appendix K. Findings: Part 1 Structural Model and Independent Samples T-Test Analyses A structural equation model reflecting the conceptual model show in Figure 20 was created using the information from the measurement model to test Hypotheses 1 3 and 5 8 using IBM AMOS software. Single summated scales were calculated to represent how next-generation leaders answered questions about their leadership behaviors that reflect emotional and social intelligence competencies and how their multi-raters answered those same questions using the scores for the emotional and social intelligence factors developed in the exploratory and confirmatory factor analyses for the 286

311 full sample (n = 567). A single variable representing the absolute difference in multirater and next-generation self-assessment scores was then created to measure nextgeneration self-awareness and to test Hypotheses 5 6. An independent samples t-test was conducted to test Hypothesis 4 by comparing the means of emotional and social intelligence multi-rater/self difference scores for next-generation family leaders who were rated above the median on leadership effectiveness and those who were rated below the median. Collinearity Assessment of Predictor Variables Before proceeding with hypothesis testing, a collinearity test was conducted for the predictor variables in the CB-SEM model to ensure that they were sufficiently distinct. Collinearity among predictor variables inflates the standard errors of estimates rendering statistical tests and punctual estimates meaningless. Tolerance and its inverse, the variance inflation factor (VIF), measure collinearity. Tolerance is simply the amount of variance in an independent variable that is not explained by the other independent predictor variables. Tolerance values below.20 and VIF values above 5 indicate potential collinearity problems (Hair Jr et al., 2013). All of the predictor variables in the model demonstrated tolerance and VIF values well within acceptable limits. See Table 49 for a summary of the collinearity assessments of the predictor variables for each endogenous construct in the model. 287

312 Table 49. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Collinearity Assessment of Predictor Variables Variable Tolerance VIF ESI DF IAut MESI NESI OC Significance of Path Coefficients The size and significance of the path coefficients of hypothesized relationships in the structural equation model were determined by calculating estimates in AMOS. Results are summarized in Table 53 and discussed for each hypothesized relationship below. Coefficients of Determination Coefficients of determination (R²) values for each of the three endogenous latent constructs in the model are shown in the final model in Figure 23. R² values measure the amount of variance in the construct explained by the exogenous variables in the model. R² was.83 for next-generation leadership effectiveness,.50 for next-generation work engagement,.15 for multi-rater assessment of next-generation leader emotional and social intelligence, and.06 for the multi-rater/self emotional and social intelligence difference score. While there are no universal standards for acceptable R² values, these values of are practical significance for the purposes of this study (Hair Jr et al., 2013). Results of Hypothesis Testing H1: Next-generation family firm leader self-ratings of leadership behaviors reflective of emotional and social intelligence competencies do not predict their 288

313 leadership effectiveness. Contrary to expectations, next-generation leader selfassessment of leadership behaviors reflective of emotional and social intelligence did predict leadership effectiveness (.37, p <.01); explaining 14 % of the variance in the dependent variable. However, as discussed below, the relationship between nextgeneration leader self-assessment of emotional and social intelligence was fully mediated by observer (multi-rater) assessment. H2: Observer ratings of next-generation family firm leader behaviors reflective of emotional and social intelligence competencies predict next-generation leader leadership effectiveness. Observer (multi-rater) assessment of next-generation leader behaviors reflective of emotional and social intelligence strongly predicted leadership effectiveness (.90, p <.001); providing support for Hypothesis 2. Furthermore, when the multi-rater construct was added to the model, the path from next-generation leader selfassessment of emotional and social intelligence to leadership effectiveness dropped out of significance, suggesting mediation. Consequently, a mediation test was conducted using the Baron and Kenny approach (1986).Three types of mediation are possible: full, partial, and indirect. Full mediation occurs when a relationship between two variables X and Y is fully explained by an intervening variable A. Evidence of full mediation is present when a significant direct relationship between X and Y becomes insignificant when a third variable A, that is significantly and directly related to both X and Y, is introduced between them. Evidence of partial mediation is present when the direct relationship between X and Y remains, but is weaker, when the mediating variable A is introduced. Indirect mediation occurs when there is no significant direct relationship between X and Y but there are 289

314 significant direct relationships between X and A, and A and Y. This indicates that X has an indirect effect on Y through its direct effect on A (Hair et al., 2010). The results of the Baron and Kenny mediation test indicate that multi-rater assessment of next-generation leader emotional and social intelligence fully mediates the relationship between next-generation self-assessment of emotional and social intelligence and leadership effectiveness. There were significant direct relationships between self- and multi-rater assessments of next-generation emotional and social intelligence (.36, p <.01) and between multi-rater assessment and leadership effectiveness (.90, p <.001). When the multi-rater construct was added to the model as a mediator, the direct relationship between next-generation leader self-assessment of emotional and social intelligence and leadership effectiveness dropped out of significance. Results of the mediation test are summarized in Table 50. Table 50. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Mediation Test Results Direct Beta Without Mediator Direct Beta With Mediator Mediation Type Observed Indirect Relationship Beta NESI LEV.37**.01 (ns).33** Full Notes: **p<.01, (ns) = non-significant, NESI = next-generation leader selfassessment of emotional and social intelligence, LEV = leadership effectiveness, mediator is multi-rater assessment of next-generation leader emotional and social intelligence (MESI) H3: Next-generation family firm leader self-ratings of leadership behaviors reflective of emotional and social intelligence competencies predict the degree to which they are engaged with their work in the family firm. As hypothesized, next-generation leader self-assessment of leadership behaviors reflective of emotional and social 290

315 intelligence competencies had a strong positive effect on the degree to which they are engaged with their work (.67, p <.001). The f² effect was large (.72), with 51% of the variance in the dependent variable explained when no other predictors of engagement with work were included in the model. This result suggests that the degree to which next-generation leaders in family firms derive meaning, joy, and energy from their work in the family firm is strongly related to their self-perceptions of leadership behaviors. The more positive those self-perceptions, the more next-generation leaders are engaged with their work. However, it says nothing about how the accuracy of those perceptions may affect their engagement with work, an issue explored through testing Hypothesis 6, nor about how the climate in the business-owning family affects how accurate those perceptions are, an issue explored through testing Hypotheses 7 and 8. H4: More effective next-generation family firm leaders rate themselves lower and less effective leaders rate themselves higher on leadership behaviors reflective of emotional and social intelligence competencies than their observers rate them. To test Hypothesis 4, the sample was divided into two groups, those next-generation leaders whose leadership effectiveness was rated above the median (4.13 on a five-point Likerttype scale) and those whose leadership effectiveness was rated below the median. Next, a difference score representing the difference in how next-generation leaders assessed their own leadership behaviors reflective of emotional and social intelligence competencies and how their multi-raters assessed those same behaviors was calculated. A positive score indicates that multi-raters scored the next-generation leader they were evaluating higher on emotional and social intelligence than the next-generation leader 291

316 scored himself/herself. A negative score indicates that a next-generation leader scored himself/herself higher on emotional and social intelligence than his/her multi-raters did. The mean emotional and social intelligence difference score was.16 (SD =.43) for the more effective leaders (n = 50) and -.10 (SD =.57) for the less effective leaders (n = 50), indicating that on average, more effective leaders rated themselves lower on emotional and social intelligence competencies than their multi-raters rated them, and less effective leaders rated themselves higher than their multi-raters rated them. An independent samples t-test was conducted in SPSS to determine if the difference in these two mean scores was significant. First, the over-rater and under-rater difference score distributions were tested for normality by calculating critical value z-scores for the skewness and kurtosis values for both groups. In all instances, the z-scores were below +/ (.01 significance level) demonstrating sufficient normality for conducting a t-test (Hair et al., 2010). Results of the normality test are shown in Table 51. Levene s F test was significant (F[98] = 5.21, p =.025), indicating that the variances in the two groups were not homogeneous. However, SPSS compensates for this by calculating a t-statistic when variances are not assumed to be equal. The results of the independent samples t- test when equal variances are not assumed (t[90] = -2.59, p =.011) indicated that the emotional and social intelligence difference scores for next-generation leaders who were rated above the median for leadership effectiveness and those rated below the median were significantly different. Cohen s d was estimated at -.52, a moderate effect based on Cohen s (1988) guidelines. While the hypothesis that more effective next-generation leaders rate themselves lower on emotional and social intelligence competencies than their observers rate them 292

317 and that less effective next-generation leaders rate themselves higher was supported, the results should be viewed with caution. While it was shown that on average, the more effective leaders rated themselves lower (µ =.16) and the less effective leaders rated themselves higher (µ = -.10), an examination of the data revealed that of the 50 nextgeneration leaders rated above the median on leadership effectiveness, 30 rated themselves lower on emotional and social intelligence competencies than their multiraters rated them and 20 rated themselves higher. Of the 50 next-generation leaders rated below the median on leadership effectiveness, 26 rated themselves higher on emotional and social intelligence competencies than their multi-raters rated them and 24 rated themselves lower. Perhaps a more meaningful analysis would be one that examines the relationship between the degree to which next-generation leaders overestimate or underestimate their emotional and social intelligence competencies relative to their observers ratings (self-awareness) and their leadership effectiveness. Additional insight might also be gained by testing the relationship between next-generation leader selfawareness and leadership effectiveness for less effective and more effective leaders. These relationships are examined in the post-hoc analysis summarized later in the paper. Table 51. Emotional and Social Intelligence Difference Scores Leadership Effectiveness Groups Leadership Effectiveness Group Group Size Difference Score Mean Standard Deviation Skewness z- value Kurtosis z-value Lower Higher H5: Lack of next-generation family firm leader self-awareness of their leadership behaviors negatively affects their leadership effectiveness. Next-generation leader self- 293

318 awareness was measured using the absolute value of the difference score for multirater/self-assessment of next-generation leader emotional and social intelligence competencies. A variable representing this difference score was created and entered into the structural equation model as show in Figure 23. There was a negative relationship between the difference score and leadership effectiveness (-.13, p <.05), indicating that a lack of self-awareness negatively affects leadership effectiveness, thus providing support for Hypothesis 5. A post-hoc analysis detailed below was conducted to determine if there was a significant difference in how leadership effectiveness was affected for nextgeneration leaders who underrated ( under-raters ) versus those who overrated ( overraters ) their emotional and social intelligence competencies relative to their multi-raters. H6: Lack of next-generation family firm leader self-awareness of their leadership behaviors negatively affects their engagement with work. There was also a negative relationship between the emotional and social intelligence difference score and nextgeneration leader engagement with work (-.21, p <.05), indicating that a lack of selfawareness negatively affects the degree to which next-generation leaders are engaged with their work in the family firm, and providing support for Hypothesis 6. The relationship between lack of self-awareness and next-generation leader engagement with work was also included in the post-hoc analysis to determine if there was a difference in the relationship between lack of self-awareness and engagement with work for nextgeneration under-raters and over-raters of their emotional and social intelligence competencies. H7: A family climate characterized by open communication in the businessowning family positively affects the degree to which next-generation family firm leaders 294

319 exhibit self-awareness of their leadership behaviors. There was a negative relationship between open communication in the business-owning family and the absolute difference score for next-generation emotional and social intelligence (-.25, p <.05), which represents next-generation leader self-awareness. This result suggests that the greater the open communication in the family, the less the gap in next-generation family leader selfawareness, thus providing support for Hypothesis 7. While not hypothesized, a positive relationship between open communication in the business-owning family and observer ratings of next-generation family leader emotional and social intelligence competencies was also identified (.21, p <.05). Because observer ratings of next-generation leader emotional and social intelligence so strongly predicted leadership effectiveness, this is an important finding, as it suggests that open communication in the family has a positive effect on the degree to which next-generation family leaders learn and practice the leadership skills associated with leadership effectiveness. H8: A family climate characterized by a senior generation in the business owning family that sets all the rules and exercises unquestioned authority (intergenerational authority) negatively affects the degree to which next-generation family firm leaders exhibit self-awareness of their leadership behaviors. There was a positive relationship between intergenerational authority in the business owning family and the absolute difference score for next-generation emotional and social intelligence (.10, ns), but the relationship was not significant, so Hypothesis 8 was not supported. However, the statistical power for this relationship was.61 at an alpha level of.05, below the.80 threshold recommended by Cohen (1988), so a possible relationship cannot be ruled out. 295

320 Testing this relationship with a larger sample size sufficient to reach the.80 statistical power threshold is suggested for future research. The results of hypothesis testing are summarized in Table 52. More complete results of the statistical tests performed to test the hypotheses are presented in Table 53. The structural equation model was trimmed of insignificant paths to produce the final model shown in Figure 23. Controls Age of the next-generation leader was included as a control variable in the study because leadership skills are learned over a long period of time (Boyatzis & McKee, 2005; Kotter, 1982; Mccall et al., 1988), suggesting that the older next-generation leaders might be judged as more effective by their observers. However, there was no effect of age on leadership effectiveness (.09, ns) or engagement with work (.15, ns). Table 52. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Summary of Hypothesis Testing Results Hypothesis H1: Next-generation family firm leader self-ratings of leadership behaviors reflective of emotional and social intelligence competencies do not predict their leadership effectiveness. H2: Observer ratings of next-generation family firm leader behaviors reflective of emotional and social intelligence competencies predict next-generation leader leadership effectiveness. H3: Next-generation family firm leader self-ratings of leadership behaviors reflective of emotional and social intelligence competencies predict the degree to which they are engaged with their work in the family firm. H4: More effective next-generation family firm leaders rate themselves lower and less effective leaders rate themselves higher on leadership behaviors reflective of emotional and social intelligence competencies than their observers rate them. Coefficient Support for Hypothesis.37** No.90*** Yes.67*** Yes See Table 51 Yes 296

321 H5: Lack of next-generation family firm leader selfawareness of their leadership behaviors negatively affects their leadership effectiveness. H6: Lack of next-generation family firm leader selfawareness of their leadership behaviors negatively affects their engagement with work. H7: A family climate characterized by open communication in the business-owning family positively affects the degree to which next-generation family firm leaders exhibit self-awareness of their leadership behaviors. H8: A family climate characterized by a senior generation in the business owning family that sets all the rules and exercises unquestioned authority (intergenerational authority) negatively affects the degree to which next-generation family firm leaders exhibit selfawareness of their leadership behaviors. Notes: ***p<.001, **p<.01,* p<.05, (ns) = nonsignificant -.13* Yes -.21* Yes -.25* Yes.10 (ns) No Table 53. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Significance Test Results of Structural Equation Model Path Coefficients Path Standardized Coefficient Standardized Error Critical Ratio p- value ESI_DF LEV ESI_DF UWE IAut ESI_DF MESI LEV *** NESI MESI NESI UWE *** OC ESI_DF OC MESI ***p <

322 Figure 23. Effects of Next-Generation Leader Self-Awareness on Leadership Effectiveness and Work Engagement Post-Hoc Analyses: Part 1 Prompted by the results of the independent samples t-test used to test Hypothesis 4, five post-hoc analyses were conducted. The first compared the relationship between next-generation leader self-awareness and leadership effectiveness for leaders who underrated their emotional and social intelligence competencies relative to their observers with those who overrated those same competencies. The second compared the degree to which next-generation leader self-awareness predicted the leadership effectiveness of the less effective leaders in the study with the degree to which it predicted the leadership effectiveness of the more effective leaders in the study. The third tested for differences in the negative effect of lack of self-awareness on work engagement for the less and more effective leaders in the study. A fourth tested for differences in the negative effect of lack of self-awareness on work engagement for next-generation leaders who underrated and those who overrated their emotional and social intelligence competencies. The fifth 298

323 tested for differences in the self-awareness of next-generation family CEOs and nextgeneration family members who held other leadership positions in the family firm. A group difference test demonstrated that there was a significant difference (z score = 3.39) in the relationship between next-generation leader self-awareness and leadership effectiveness for those leaders who underrated their emotional and social intelligence (n = 54) relative to their observers and those who overrated their emotional and social intelligence (n = 46). For the over-raters, there was a moderately strong negative effect of lack of self-awareness on leadership effectiveness (-.42, p <.001). For the under-raters, the effect was very slightly positive but insignificant (.01, ns). The statistical power was 1.0, well above Cohen s (1988) recommended level of.80 to accept this insignificant result. This finding is quite important as it suggests that next-generation leaders who think their leadership skills are stronger than their observers perceive them to be limit their leadership effectiveness. The result further suggests that next-generation leaders who underestimate their leadership skills do not affect their leadership effectiveness in either direction. The finding from the first post-hoc analysis was further confirmed by the second. A group difference test demonstrated that there was a significant difference (z score = 2.72) in the relationship between next-generation leader self-awareness and leadership effectiveness for the less effective (n = 50) and the more effective leaders (n = 50) in the study. For the less effective leaders, the effect was negative and moderately strong (-.31, p <.01). For the more effective leaders, the effect was slightly positive but insignificant (.09, ns). The statistical power for this finding was also 1.0, more than sufficient to accept the insignificant result. 299

324 The first and second post-hoc analyses taken together provide more insight into the relationship between next-generation family leader self-awareness of leadership behavior and their leadership effectiveness than was gleaned from the independent samples t-test used to test Hypothesis 4. The results of the ad-hoc analyses suggest that next generation leaders who have an inflated view of their leadership skills limit their leadership effectiveness. This finding has particularly important implications for nextgeneration family firm leaders as their opportunities for accurate feedback on leadership performance are often limited, which may in turn affect their self-awareness of leadership behaviors, a topic more fully addressed in the discussion section of the paper. A third post-hoc group analysis failed to detect a significant difference in the negative effect of lack of self-awareness on next-generation engagement with work for the less effective and more effective next-generation leaders in the study. A fourth adhoc analysis indicated no significant difference in this relationship for the under-raters or over-raters of leadership behaviors. This was somewhat surprising as it seems logical to think that there might be differences in work engagement for less effective leaders who tend to overestimate their leadership behaviors and more effective leaders who tend to underestimate them. Perhaps more effective leaders who meaningfully underestimate their leadership behaviors limit their ability to derive energy, happiness, and inspiration from their work because they are particularly hard on themselves, over-striving to improve and achieve. Using the same logic, perhaps less effective leaders who meaningfully overestimate their leadership behaviors limit their engagement with work because they are under-motivated to grow as leaders and fail to challenge themselves to improve. 300

325 Because approximately half (n=51) of the next-generation leaders in the study were CEOs, a fifth post-hoc analysis was prompted by research that indicates CEOs often have less self-awareness than other leaders because they receive less accurate feedback (Goleman et al., 2002), and because a significant difference in the effect of open communication on next-generation leader self-awareness for CEOs and the other leaders in our study was detected (z score = -2.92). First, an independent samples t-test was conducted in SPSS to determine if there was a significant difference in the self-awareness scores as measured by the difference in multi-rater and next-generation leader self-assessments of emotional and social intelligence competencies (ESI_DF) for CEOs and other leaders in our study. The mean emotional and social intelligence difference score was -.06 (SD =.42) for the CEOs (n = 51) and.12 (SD =.60) for the other leaders (n = 49), indicating that on average, nextgeneration family CEOs rated themselves higher on emotional and social intelligence competencies than their multi-raters rated them, and next-generation leaders who held other leadership positions in the family firm rated themselves lower than their multiraters rated them. The CEO and other leader difference score distributions were tested for normality by calculating critical value z-scores for the skewness and kurtosis values for both groups. In all instances, the z-scores were below +/ (.01 significance level) demonstrating sufficient normality for conducting a t-test (Hair et al., 2010). Results of the normality test are shown in Table 54. Levene s F test was insignificant (F[98] = 2.2, p =.141), satisfying the assumption of homogeneity of variances t-tests. The results of the independent samples t-test (t[98] = -1.78, p =.078) indicated that the emotional and social intelligence difference scores for CEOs and other leaders were significantly 301

326 different, although only at a 90% confidence level. Cohen s d was estimated at -.35, halfway between a small and moderate effect based on Cohen s (1988) guidelines. Table 54. Emotional and Social Intelligence Difference Scores Leadership Position Groups Leadership Position Group Group Size Difference Score Mean Standard Deviation Skewness z-value Kurtosis z-value CEO Other The next step involved comparing the effect of open communication in the business-owning family on the level of self-awareness for the CEOs and the other leaders in the study. For the other leader group, the effect of open communication on selfawareness was moderately strong (-.43, p <.001), indicating that open communication significantly reduced lack of self-awareness for the other leadership group. For CEOs, there was essentially no effect of open communication on self-awareness (.00, ns). This result implies that open communication helps next-generation family leaders in positions other than the CEO position improve their self-awareness but has no effect on the family CEOs. Possible explanations are explored in the discussion section of the paper. Summaries of group differences explored in the post-hoc analyses are presented in Tables 55 and

327 Table 55. Emotional and Social Intelligence Difference Scores Effect on Leadership Effectiveness Group Standardized Estimate p-value z-score Under-raters Over-raters *** Less Effective Leaders More Effective Leaders *** ***p<.001 Table 56. Effect of Open Communication on Emotional and Social Intelligence Difference Scores Leadership Position Groups Group Standardized Estimate p-value z-score CEOs *** Other Leaders ***p<.001 Discussion: Part 1 The first phase of the study was designed to examine the effects of nextgeneration family firm leader self-perceptions of leadership behaviors on their leadership effectiveness and positive engagement with their work in the family business. An important goal of the study was to determine if self-perceptions of leadership behaviors predict the leadership effectiveness of next-generation leaders and/or their engagement with work. A second goal was to explore how next-generation leader self-awareness, defined as the difference between observer and next-generation leader self-assessments of leadership behaviors, affects their leadership effectiveness and work engagement. A third goal was to determine if the climate of the business-owning family influences the degree to which next-generation leaders of the family business exhibit self-awareness. The major findings of this phase of the study are summarized and discussed below. 303

328 Observer assessments of next-generation family leader behaviors reflective of emotional and social intelligence competencies are much stronger predictors of their leadership effectiveness than next-generation leader self-assessments. Contrary to the hypothesized relationship, next-generation leader self-assessments did predict their leadership effectiveness (.37, p <.01), explaining 14% of the variance in leadership effectiveness when only self-assessment scores were included in the structural equation model. However, observer (multi-rater) assessments of next-generation leader behavior were much stronger predictors of next-generation leader effectiveness (.90, p <.001), fully mediated the relationship between next-generation leader self-assessment and leadership effectiveness, and explained 83% of the variance in leadership effectiveness. This finding is consistent with much of the literature on 360 leadership surveys that use a mixed-model (O'Boyle et al., 2011) or behavioral (Boyatzis et al., 2014) approach in measuring emotional and social intelligence like the one used for this study, which indicates that self-assessments are less accurate indicators of leadership behaviors than observer assessments (Boyatzis et al., 2014; Taylor, 2014; Wolff, 2005). This is not to suggest that leader self-assessments of emotional and social intelligence are of no value, as in this study they moderately predicted observer ratings (.36, p <.01), thus indirectly predicting leadership effectiveness (.33, p <.01). The implications of this finding are important. First, it suggests there is a meaningful difference in the way the next-generation leaders in the study perceive their leadership behaviors and the way others with whom they work perceive them, and that this gap may affect their leadership effectiveness. Second, it suggests that for researchers and practitioners alike, surveying next-generation leader observers in family firms is 304

329 necessary to get an accurate picture of next-generation leader behavior and effectiveness. The greatest value of self-assessments may be in using them to measure the effects of gaps between a next-generation leader s perception of his/her leadership behaviors and how others perceive them. Identifying the gaps can help next-generation leaders become more self-aware and motivate changes in leadership behaviors to help them improve their leadership effectiveness (Boyatzis, 2008). Measuring the gaps in next-generation leader perceptions of leadership behaviors in this study produced the most important results, which are discussed next. Next-generation family leader lack of self-awareness limits their leadership effectiveness. As reported in the results section of the paper, next-generation family leader lack of self-awareness negatively affected their leadership effectiveness (-.13, p <.05). Perhaps the most powerful result in the study, however, was the discovery of the differences in the relationship between lack of next-generation leader self-awareness and leadership effectiveness for less effective and more effective leaders, and for those leaders who overrated and those who underrated their leadership behaviors. Nextgeneration leaders who overrated their leadership behaviors negatively affected their leadership effectiveness (-.42, p <.001), while there was no effect on leadership effectiveness for those who underrated them (.01, ns). Furthermore, the effect of lack of self-awareness for the less effective leaders on leadership effectiveness was negative and moderately strong (-.31, p <.01), while there was no significant effect on the leadership effectiveness of the more effective leaders in the study (.09, ns). In addition, on average, the less effective leaders in the study overrated and the more effective leaders underrated their leadership behaviors relative to their observers. 305

330 Two reasons for the difference in results for the less effective and more effective next-generation leaders seem plausible. First, the results demonstrate the strong effect of leadership behaviors reflective of emotional and social intelligence competencies on leadership effectiveness (.90 p <.001), so even if the more effective leaders lack some degree of self-awareness, it is likely they exhibit other leadership behaviors that identify them as effective leaders. Second, the results indicate that the more effective leaders tend to underrate their leadership behaviors. This is consistent with research that indicates that the most effective leaders are often modest and humble (Hogan & Kaiser, 2005) and are constantly striving to improve (Boyatzis & McKee, 2005). In his classic book Good to Great, Collins (2001) refers to such effective leaders as Level 5 leaders. So for the more effective leaders in the study who underrate their leadership behaviors, the gap between observer and self-ratings may be more an indication of their desire to improve than lack of self-awareness. On the other hand, the results imply that next-generation family leaders may be perceived as less effective if they fail to accurately perceive how others with whom they work actually experience their leadership behaviors, a true lack of self-awareness. As a result, they tend to overrate their leadership skills and are insensitive to the need to improve their leadership skills. The study findings suggest that next-generation leaders can achieve better leadership results by improving their emotional and social intelligence competencies, which were so strongly related to leadership effectiveness (.90, p <.001). The conundrum is that they are unlikely to be motivated to improve if they are unaware of the gap between their self-perceptions and those of their observers. While this is important in any context, it is of particular importance in a family business because next- 306

331 generation leaders of family firms who are also members of the business-owning family often do not receive accurate or frequent feedback on their leadership behaviors (Poza, 2013). In fact, a qualitative study of 37 family business leaders suggested that less effective next-generation family leaders are often shielded from the consequences of their leadership behaviors (Miller, 2012). Family members may be reluctant to communicate the need to improve leadership skills of next-generation family leaders for fear of damaging family relationships, or in an effort to protect developing next-generation family members. Non-family leaders in the family firm may also hesitate to counsel next-generation family members already in or being trained for leadership positions about the need for performance improvements with the knowledge that the boss s son, daughter, nephew, or niece may one day become their new boss. Intentional change theory provides a useful way of thinking about the importance of self-awareness in helping less effective next-generation family leaders make meaningful changes in their leadership behaviors. Intentional change theory identifies five non-linear and often discontinuous experiences or discoveries that emerge in the change process (Boyatzis, 2006, 2008). The first is envisioning a desired self, and describes the process of creating a dream for what one wants to become in the future. The second discovery is the real self, which refers to the self others see. Discovering gaps between what one wants to become and how others perceive one to be is a powerful motivator for change (Boyatzis, 2006, 2008; Boyatzis & McKee, 2005). The third emergence is developing a learning agenda to move from the real self to the ideal self. The fourth discovery is experimenting with new behaviors and then practicing them until they become second nature. The fifth emergence is forming trusting relationships with 307

332 others who support the desired change effort by providing feedback, support, and permission for change (Boyatzis, 2006, 2008). Without accurate feedback, nextgeneration family leaders may never make intentional change theory s second discovery and become aware of the need to improve their leadership skills. Without that awareness, they may fail to fully develop their leadership potential, limiting their effectiveness and the performance of the family enterprises they lead. The study results on the effect of open communication in business-owning families, discussed later in the paper, suggest that family members can play an important role in helping next-generation family members become more self-aware and learn the emotional and social intelligence competencies that are so critical to their leadership effectiveness by helping them move through the five stages of intentional change. Next-generation family leader engagement with work in the family firm is positively affected by self-perceptions of leadership behaviors reflective of emotional and social intelligence competencies and negatively affected by lack of self-awareness. Next-generation leader self-ratings of emotional and social intelligence competencies were strongly predictive of the degree to which they were positively engaged with their work in the family firm (.67, p <.001), but the effect was attenuated by the degree to which the next-generation leaders accurately perceived them (-.21, p <.05). It is important to interpret these two results together. Without the attenuating effect of lack of self-awareness, one might somewhat cynically conclude that a next-generation leader could derive more positive energy, enthusiasm, and inspiration from their work by becoming delusionally positive about their leadership skills. A more accurate interpretation is that a realistically positive view of one s leadership behaviors results in a 308

333 greater degree of engagement with work, which could be viewed as a reward for the work necessary to improve leadership skills. One way of understanding the relationship between next-generation leader selfassessment of leadership behaviors and their engagement with work is through an understanding of the positive and negative emotional attractors that are part of intentional change theory discussed earlier. Positive emotional attractors are events, states, thoughts, or relationships that generate positive emotional responses and negative emotional attractors generate negative emotional states. Positive and negative emotional states trigger a host of cognitive and physiological reactions that affect one s openness to change, creativity, level of anxiety, and closeness to others (Boyatzis, 2008). Among these effects is that positive emotional attractors stimulate a drive to thrive and negative emotional attractors stimulate a drive to survive (Boyatzis, 2013). A balance between positive and emotional attractors is necessary to function optimally in life, and certainly as a leader. It would make sense then, that next-generation leaders with a positive view of their own leadership behaviors would be more likely express a drive to thrive through engagement with their work in the family firm. It is also logical to think that the negative emotional attractor of discovering that one s leadership behaviors may not be quite as strong as one thinks would lead to greater self-awareness, which further contributes to a next-generation leader s engagement with work. While there were no differences in the effect of lack of self-awareness on work engagement for the more and less effective next-generation leaders or for those who underrated and those who overrated their leadership behaviors, it seems logical to think that the reasons behind the negative effect of lack of self-awareness for the more effective 309

334 leaders who underestimate their leadership behaviors and the less effective leaders who overestimate their leadership behaviors might be quite different. The effective underraters may strive so hard to continue to improve their leadership skills that they unintentionally restrict their ability to fully enjoy their work in the family firm, deriving less energy and inspiration from their work than might be possible if they were not quite so hard on themselves. On the other hand, the less effective next-generation leaders who overrate their leadership behaviors may experience less of intentional change theory s drive to survive because they think they are better leaders than they really are, thus engaging less with their work in the family firm, failing to improve, and putting the survival of the family firm itself at risk. It turns out that open communication in the business-owning family, discussed next, has important effects on next-generation leader self-awareness and leadership behavior, which in turn predict their leadership effectiveness and engagement with work. Open communication in the business-owning family helps next-generation family leaders become more self-aware, develop emotional and social intelligence competencies, improve their leadership effectiveness, and become more positively engaged with their work in the family firm. What differentiates family firms from public or other privately-owned companies is the influence of family members on the strategy and culture of the business. While the climate of the family one grew up in influences the personality and behavior of a leader in any setting (Kerr, 1988), leaders in most public and non-family private companies interact exclusively with non-family members at work, who may teach new and different leadership lessons than those gleaned from one s family of origin. In contrast, next-generation leaders of family firms must 310

335 contend with three distinct but overlapping systems: the business system, the family system, and the ownership system (Gersick et al., 1997) (see Figure 23). As a result, next-generation family leaders in multi-generational family firms interact with other family members who are co-workers and/or owners, often for their entire careers in the family business. For a next-generation leader who is a member of the business-owning family, the climate of the family is likely to have an ongoing influence on his/her development of leadership skills. Figure 23. Three-Systems Family Business Model Gersick, Kelin E., Davis, John A., Hampton, Marion McCollom, & Lansberg, Ivan Generation to generation: Life cycles of the family business. Harvard Business School Press, Boston. The study results suggest that open and transparent communication in the business-owning family negatively affects lack of next-generation leader self-awareness (-.25, p <.05). Expressed in positive terms, open communication in the family helps a next-generation leader develop a more accurate assessment of his/her leadership behaviors. While not hypothesized, it also turned out that open communication in the 311

336 family had a meaningfully positive direct effect on the degree to which the nextgeneration leaders in the study exhibited leadership behaviors reflective of emotional and social intelligence competencies as observed by those with whom they work (.21, p <.05). As a result, open communication had a meaningful total indirect effect on nextgeneration leadership effectiveness (.22, p =.05). Viewing these results through the lens of intentional change theory (Boyatzis, 2008), it follows that open communication in the business-owning family helps next-generation family leaders discover gaps between their desired and actual leadership behaviors and establishes a supportive environment to help them practice and improve their leadership skills. On the other hand, lack of open communication, which is common in many business-owning families, has the opposite effect. The study results further demonstrate that the benefit of open communication in the family on next-generation self-awareness extends beyond its effect on leadership effectiveness. Lack of next-generation self-awareness had a negative effect on engagement with work (-.21, p <.05), resulting in an indirect positive effect of open communication on engagement with work (.05, p <.05). The irony in this finding is that senior generation family firm leaders who have a strong desire for the next-generation to become actively engaged with the family business often try to foster that engagement by shielding the next-generation leaders from the consequences of their leadership behaviors (Miller, 2012), exactly the opposite of what the study results suggest they should do. Open communication is often viewed as the sine qua non of effective family businesses (Carlock & Ward, 2010; Gersick et al., 1997; Ward, 2004b). The literature documents its benefits to family business longevity, family relationships (Ward, 2004b), 312

337 effective family business governance (Pendergast, Ward, & De Pontet, 2011), succession (Handler, 1994), and a host of other issues. A major contribution of this study to the family business literature is demonstrating its importance to the development of leadership skills among next-generation family leaders and their positive engagement with work in the family firm. Data Analysis: Part 2 Measurement and Structural Equation Model Analysis: Part 2 Partial least squares structural equation modeling (PLS-SEM) was used to analyze the data used for testing Hypotheses 9-14 in Part 2 of the study. Part 2 explores the effects of a variety of leadership development experiences encountered by nextgeneration family leaders, with a focus on those that have made a lasting impact on their leadership practices. Like CB-SEM, PLS-SEM is also a powerful regression-based technique for testing causal models with multiple constructs, but uses different distributional assumptions and estimation objectives, thus requiring less stringent distributional and sample size requirements than CB-SEM. PLS-SEM excels in exploratory research (Gefen et al., 2011), allows modeling of abstract concepts with many indicators (observed variables), and enables the estimation of causal networks including direct and indirect effects simultaneously (Lowry & Gaskin, 2014), all of which were important for the research objectives in Part 2. PLS-SEM was particularly well suited for the second part of the study because it is more exploratory in nature than Part 1 (Gefen et al., 2011; Hair Jr et al., 2013; Lowry & Gaskin, 2014). Part 2 uses responses to questions about next-generation leader experiences to develop three constructs unique to this study. The survey questions were based on the results of two qualitative studies 313

338 (Mccall et al., 1988; Miller, 2012), rather than on previously validated quantitative scales. Smart PLS Version 2.0.M3, was used to create the measurement model and assess relationships among the constructs. Next-Generation Leader Assessment of Leadership Development Experiences (n = 100) An exploratory factor analysis (EFA) was conducted in SPSS using the responses to 20 questions about next-generation leader developmental experiences. A clean threefactor pattern matrix that explained 57% of the total variance was identified. Item communalities ranged from.47 to.70, with all items above the acceptable threshold of.50 established for the study (Hair et al., 2010), except for lde_3, which was very close to the threshold with a communality of.47. The Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value was.74 and the Bartlett's Test of Sphericity was significant (x² = , df = 55, p <.000), indicating sufficient inter-correlations for factors to emerge. All items loaded on their respective factors with values greater than.50, considered to be the minimum conservative value for practical significance (Hair et al., 2010). There were only three cross-loadings, and they differed from the value of the loading on the primary factor by more than.20, indicating sufficient discriminant validity. Composite reliability for all three factors were above the.70 threshold recommended by Hair, Hult, Ringle, and Sarstedt (2013). Since the development of these constructs was exploratory, particular attention was given to the content validity of the resulting factors (Hair et al., 2010; MacKenzie, Podsakoff, & Podsakoff, 2011). Challenging work experience includes an increase in responsibility at work, a failure at work, a success at work, a job assignment that challenged you, and a crisis; all of which are logically reflective of challenging work 314

339 experiences. The mentoring construct includes having a mentor, advice from a parent, advice from a family member other than a parent, and a boss who was a positive role model, all of which are logically reflective of mentoring. Of particular interest in this study is the importance of advice from parents and other family members to the next-generation s development of leadership practices, as it seems reasonable to think that source of mentoring may be of less importance in a non-family business context. The formal training construct includes only two items, university-based undergraduate or graduate class, and leadership position in high school or college. The other two items related to training outside of an educational institution did not load sufficiently on any factor, probably because they were two of the three least experienced items among the 20 options provided. 43 of the leaders in the study had never used a leadership coach and 24 indicated that had not participated in a formal leadership program. See Table 57 for a summary of EFA results for the next-generation leader assessment of leadership development experiences constructs. Table 57. Next-Generation Leader Assessment of Leadership Development Experiences EFA Results (n = 100) Factor/Construct No. of Items Loadings Composite Reliability Challenging Work Experiences 5.56,.90,.82,.59, (CWE) Mentoring (MNT) 4.60,.70,.74, Formal Training (FT) 2.79, Measurement Model Analysis in Smart PLS Smart PLS assesses the measurement model and structural model simultaneously. Outer model statistics were calculated by Smart PLS to assess the measurement model for the matched data set. Indicator reliability is demonstrated by outer loadings of.708 or 315

340 higher on the latent variables in a PLS model (Hair Jr et al., 2013). All of the indicators in the final measurement model met this standard except lde_9_cub (.69), lde 11_sq (.60), and uwe_6 (.58). Hair, Hult, Ringle, and Sarstedt (2013) recommend removing indicators with outer loadings between.40 and.70 only if doing so results in an increase in the composite reliability and/or average variance extracted for the latent variable on which they load above their suggested threshold values. Since this was not the case for these three indicators, they were retained in the model. Composite reliability was above the recommended threshold of.708 for each of the latent constructs in the model, demonstrating their reliability (Hair Jr et al., 2013). Average variance extracted (AVE), which demonstrates convergent validity, was above the recommended threshold of.50 (Hair et al., 2010) for all constructs. Discriminant validity for the constructs was demonstrated using three tests. First, the cross loadings table that is part of the Smart PLS output was examined and it was determined that the loading of each indicator on its primary construct was higher than its loading on any other construct (Hair Jr et al., 2013). Two tests recommended by Fornell and Larker (1981) further demonstrated the discriminant validity of the constructs. First, average variance extracted for each construct was greater than its maximum shared variance (MSV) with any other construct. This is determined by squaring a construct s highest correlation with any other construct and comparing the result to the AVE. A more stringent test of discriminant validity was conducted by comparing the square root of AVE for each construct with its highest correlation with any other construct as shown in the correlations matrix in Table 59. In all cases, the square roots of the AVEs were 316

341 higher than their correlations with any other construct, confirming discriminant validity for each of the constructs. Finally, R² values for the endogenous variables in a Smart PLS model are important in assessing measurement models. The model produced R² values of.24 for work engagement and.06 for leadership effectiveness, the two dependent variables of primary interest. While exact interpretations of R² values are dependent upon model complexity and research discipline, the R² value for leadership effectiveness is low (Hair Jr et al., 2013). This, combined with the results from Part 1 of this study and an earlier quantitative study that examined a broader array of factors that influence next-generation leadership effectiveness and work engagement (Miller, 2014), motivated the post-hoc analysis detailed later in the paper to explore how challenging work experiences, mentoring, and formal training may affect other factors that more strongly predict nextgeneration leader effectiveness and engagement with work. Overall, however, this simple model exhibits adequate reliability and validity for meaningful evaluation of the study s hypotheses related to the effects of leadership development experiences on nextgeneration leader effectiveness and work engagement. A summary of the measurement model evaluation in Smart PLS (a Smart PLS confirmatory factor analysis) is shown in Table 58. The base case measurement and structural equation model is shown in Appendix L. 317

342 Table 58. Next-Generation Leader Assessment of Leadership Development Experiences Smart PLS Measurement Model CFA Results (n=100) Constructs/Items Mean Std. Dev. Std. Regression Weights t- statistic Composite Reliability Average Maximum Variance Extracted Shared Variance R² Criteria >.708 > 1.96 >.708 >.50 < AVE Challenging Work Experiences (CWE) lde_6_cub lde_8_sq lde_9_cub lde_15_cub lde_18_cub Formal Training (FT) lde_2_sq lde_ Leadership Effectiveness (LEV) lev_1_sq lev_ lev_3_sq lev_4_sq lev_5_sq Mentoring (MNT) lde_3_sq lde_11_sq lde_12_sq lde_13_cub Work Engagement (UWE) uwe_ uwe_ uwe_3_sq uwe_ uwe_5_sq uwe_ uwe_7_cub Table 59. Next-Generation Leader Assessment of Leadership Development Experiences Correlations Matrix (n = 100) Age CWE FT LEV MNT UWE Age 1.00 CWE FT LEV MNT UWE Note: Square roots of AVEs on the diagonals. 318

343 Test for Common Method Bias A test for common method bias was conducted by adding a marker variable to the model that was theoretically unrelated to any of the other constructs following the procedure recommended by Lindell and Whitney (2001). The resulting correlations matrix was examined and the maximum shared variance between the market variable and any other variable in the model was only 2%, indicating lack of common method variance (Lindell & Whitney, 2001). Findings: Part 2 Structural Model Analysis in Smart PLS Collinearity Assessment of Predictor Variables The first step in analyzing an SEM in Smart PLS is to test for collinearity of predictor variables to ensure that they are sufficiently distinct. Tolerance and its inverse, the variance inflation factor (VIF), measure collinearity. Tolerance is simply the amount of variance in an independent variable that is not explained by the other independent predictor variables. Tolerance values below.20 and VIF values above 5 indicate potential collinearity problems (Hair Jr et al., 2013). Smart PLS does not provide tolerance or VIF values, so IBM SPSS Statistics was used to perform a collinearity analysis on the predictor variables in the model, all of which demonstrated tolerance and VIF values well within acceptable limits. See Table 60 for a summary of the collinearity assessments of the predictor variables in the model. 319

344 Table 60. Next-Generation Leader Assessment of Leadership Development Experiences Collinearity Assessment of Predictor Variables Tolerance VIF CWE_CT FT_CT MNT_CT Significance of Path Coefficients Next, the size and significance of the path coefficients of the hypothesized relationships in the model were examined using bootstrapping in Smart PLS. Bootstrapping using 5,000 samples as recommended by Hair, Hult, Ringle, and Sarstedt (2013) was conducted to determine the significant relationships in the model as shown in Table 61. A summary of hypothesis testing results is provided in Table 62. Results are discussed below. Effect Size f² The next step in evaluating the predictive power of a structural equation model in Smart PLS is to calculate the relative contribution of each exogenous variable in the model to the coefficient of determination (R² value) of the endogenous variable it predicts. The formula for calculating f² value is as follows: f² = R² included - R² excluded, 1 - R² included where R² included and R² excluded are the R² values of an endogenous latent variable when a selected exogenous latent variable is included in or excluded from the model (Hair Jr et al., 2013). Cohen (1988) suggests that f² values of.02,.15, and.35 respectively, represent small, medium, and large effects. f² effects for the predictor 320

345 variables challenging work experiences (CWE), formal training (FT), and mentoring (MNT) are shown in Table 63. Predictive Relevance In addition to examining the coefficient of determination (R²) values of the endogenous latent variables in a Smart PLS structural equation model, the predictive relevance of the model should also be evaluated (Hair Jr et al., 2013). A model that demonstrates predictive relevance is one that accurately predicts the data points of indicators of reflective endogenous constructs like leadership effectiveness and work engagement in the model. Predictive relevance is measured using Stone-Geisser s Q² value (Geisser, 1974; Stone, 1974). Q² values larger than zero for an endogenous latent variable indicate that the paths in the model leading to that construct exhibit predictive relevance. The blindfolding feature in Smart PLS was used to calculate Q² values for the endogenous latent variables in the model. Both leadership effectiveness and work engagement exhibited Q² values greater than zero demonstrating the predictive relevance of the model. Q² and R² values are shown in Table 64. The q² effect size for each direct path in the model was also calculated. q² effect size indicates the predictive relevance of a specific exogenous latent variable for an endogenous latent variable. The calculation follows the same procedure used to calculate the f² effect size using the following formula: q² = Q² included - Q² excluded, 1 - Q² included where Q² included and Q² excluded are the Q² values of an endogenous latent variable when a selected exogenous latent variable is included in or excluded from the model. 321

346 Values of.02,.15, and.35 respectively represent small, medium, and large q² effect sizes (Hair Jr et al., 2013). q² effect sizes for the paths in the model are shown in Table 63. Results of Hypothesis Testing H9: The degree to which next-generation family firm leaders have faced and value challenging work experiences has a positive effect on their leadership effectiveness. As expected, challenging work experiences had a positive effect on the leadership effectiveness of the next-generation family leaders in the study (.24, p <.01). The f² (.06) and q² (.04) sizes were small. In addition, challenging work experiences was the only variable in the model that predicted leadership effectiveness, explaining 6% of its variance (R² =.06). H10: The degree to which next-generation family firm leaders have faced and value challenging work experiences has a positive effect on the degree to which they are engaged with their work in the family firm. H10 was not supported, as challenging work experiences did not demonstrate a significant effect on engagement with work (.01, ns). This was quite surprising as both the literature and logic suggest a relationship between challenging work experiences and work engagement. H11: Having a mentor, influential boss, and/or family member from whom valuable lessons are learned has a positive effect on next-generation family firm leader effectiveness. The results did not support H11 as mentoring failed to demonstrate a significant effect on leadership effectiveness (.01, ns). While the literature is mixed on the value of mentoring in learning leadership skills, a positive effect was expected for the next-generation leaders in this study as opportunities for longer and deeper relationships between mentor and mentee often exist in a family business setting. 322

347 H12: Having a mentor, influential boss, and/or family member from whom valuable lessons are learned has a positive effect on the degree to which next-generation family firm leaders are engaged with their work in the family firm. H12 was supported as there was a moderately strong positive effect of mentoring on next-generation leader engagement with work (.32. p <.01). Both the f² (.13) and q² (.07) effects were small, although the f² effect approached the lower limit for a medium effect. H13: Formal leadership training and undergraduate and graduate classes have no effect on next-generation family firm leader effectiveness. As suggested by the literature and the results of an earlier qualitative study (Miller, 2012), the formal training construct in the model had no significant effect on leadership effectiveness (.05, ns). However, the two reflective indicators of the formal training construct in the structural equation model both relate to lessons learned from classes or leadership positions in high school or college. An item representing the results of the survey question that asked specifically about the value of formal leadership training programs did not load on the construct representing formal training in the exploratory and confirmatory factor analyses. To further test H13, a simple linear regression analysis was conducted in SPSS to test for a relationship between the item that specifically measured the impact of participation in formal leadership programs and the leadership effectiveness construct. That test further supported H13, as there was no significant relationship between the formal training programs item and leadership effectiveness (-.01, ns). H14: Formal leadership training and undergraduate and graduate classes have a positive effect on the degree to which next-generation family firm leaders are engaged with their work in the family firm. H14 was supported as the formal leadership training 323

348 construct predicted next-generation engagement with work (.24, p <.01). The f² (.07) and q² (.04) sizes were small. Following the same reasoning and procedure as described for H13, a simple linear regression analysis was conducted in SPSS to test for a relationship between the formal training programs item and work engagement. The results of that test further supported H14, as valuing participation in a formal training program also predicted next-generation work engagement (.23, p <.05). Un-hypothesized relationships The degree to which the next-generation leaders in the study engaged in and valued challenging work experiences was predicted by both of the other leadership development variables in the model, mentoring (.43, p <.05) and formal training (.21, p <.05). One interpretation of this result is that mentoring and formal training may increase a next-generation leader s self-confidence, making it more likely that he/she will pursue and learn from challenging work experiences. There is support in the literature for this interpretation which will be more fully elaborated in the discussion section of the paper. Controls Age of the next-generation leader was included as a control variable in the study because leadership skills are learned over a long period of time (Boyatzis & McKee, 2005; Kotter, 1982; Mccall et al., 1988). Size of the family business was also included as a control variable because large family businesses are likely to present more opportunities for mentoring relationships and participation in formal training programs than smaller firms. Somewhat surprisingly, age had no significant effect on next-generation leadership effectiveness, but it did demonstrate a significant effect on work engagement 324

349 (.33, p <.01). Size of the family firm had no effect on leadership effectiveness or engagement with work. Table 61. Next-Generation Leader Assessment of Leadership Development Experiences Significance Test Results of Structural Model Path Coefficients Path Path Coefficient Standard Deviation t value Significance Level Age UWE *** CWE LEV ** FT CWE ** FT UWE *** MNT CWE ** MNT UWE *** **p <.05, ***p <.01 Table 62. Next-Generation Leader Assessment of Leadership Development Experiences Summary of Hypothesis Testing Results Hypothesis Coefficient Support for Hypothesis H9: The degree to which next-generation family firm leaders have faced and value challenging work experiences.24** Yes has a positive effect on their leadership effectiveness. H10: The degree to which next-generation family firm leaders have faced and value challenging work experiences has a positive effect on the degree to which they are.01 (ns) No engaged with their work in the family firm. H11: Having a mentor, influential boss, and/or family member from whom valuable lessons are learned has a.01 (ns) No positive effect on next-generation family firm leader effectiveness. H12: Having a mentor, influential boss, and/or family member from whom valuable lessons are learned has a.32*** Yes positive effect on the degree to which next-generation family firm leaders are engaged with their work in the family firm. H13: Formal leadership training and undergraduate and graduate classes have no effect on next-generation family.05 (ns) Yes firm leader effectiveness. H14: Formal leadership training and undergraduate and graduate classes have a positive effect on the degree to.24*** Yes 325

350 which next-generation family firm leaders are engaged with their work in the family firm. Notes: ***p<.01, **p<.05, (ns) = non-significant Table 63. Next-Generation Leader Assessment of Leadership Development Experiences f² and q² Effects Path Path Coefficie nt f² Effect Value f² Effect Size* q² Effect Value q² Effect Size* Age UWE Small.07 Small CWE LEV Small.04 Small FT UWE Small.04 Small MNT UWE Small.07 Small *Cohen, 1988 Table 64. Next-Generation Leader Assessment of Leadership Development Experiences Endogenous Latent Variable R² and Q² Values Endogenous Latent Variable R² Value Q² Value Leadership Effectiveness (LEV) Work Engagement (UWE) Figure 24. Effects of Next-Generation Leader Assessment of Leadership Development Experiences on Leadership Effectiveness and Work Engagement 326

351 Post-Hoc Analyses: Part 2 Two post-hoc analyses were conducted for Part 2 of the study. The first simply examined how next-generation leaders rated the impact of all twenty leadership development experiences, including those that did not load on one of the three constructs included in the multivariate analysis of the data. The analysis turned up some interesting findings, including experiences the next-generation leaders ranked as important to their development as leaders that had no significant effect on their leadership effectiveness or engagement with work. The second post-hoc analysis was prompted by the results of hypothesis testing using the structural equation model that only included the leadership development constructs and the dependent variables of interest, leadership effectiveness and work engagement. Those results supported the hypothesis that challenging work experiences would have a positive effect on the leadership effectiveness of the next-generation family leaders in the study (.24, p <.01), but the challenging work experiences construct only explained 6% of the variance in leadership effectiveness (R² =.06). This result, combined with the results from an earlier quantitative study that produced a high R² value for leadership effectiveness (Miller, 2014), motivated an exploration of the possibility that challenging work experiences might have a stronger effect on other factors that in turn explain more of the variance in leadership effectiveness. It was also surprising that challenging work experiences had no effect on work engagement, further supporting the idea of a post-hoc analysis to explore the possibility of intervening factors. Finally, the hypothesis testing results showed no direct effect of mentoring on leadership 327

352 effectiveness, also raising the question of possible indirect effects through other variables. Post-Hoc Analysis 1: Perceived Impact of Leadership Development Experiences Table 65 lists all twenty leadership development experiences included in the study, indicates whether or not they loaded on one of the three constructs used for the analysis of relationships in the structural equation model, shows the number of nextgeneration leaders who reported having had each experience, and provides nextgeneration leader ratings of the impact of each type of experience on their leadership behavior. The results of this analysis show that challenging work experiences are credited as having the most impact on lasting changes in next-generation leader behavior, accounting for four of the five most highly rated experiences. Mentoring experiences, which included advice from parents or other family members, were next in importance, accounting for three of the top ten experiences. All of the challenging work and mentoring experiences were rated between 4.13 and 4.57 on a five-point Likert-type scale, with the exception of advice from a family member other than a parent, which received a mean rating of As explained above, only two experiences loaded on the formal training construct, and both were rated lower than the challenging work and mentoring experiences, with a 3.73 mean rating for university-based undergraduate or graduate classes and a 3.22 mean rating for a leadership position in high school or college. Although participation in a formal leadership training program did not load on the construct formed by university classes and a leadership position in high school and college, it was rated as more impactful than either of the other two formal training items at 3.82, although still lower than any of the challenging work and mentoring experiences. 328

353 A summary of how next-generation leaders rated the impact of their leadership development experiences is shown in Table 65. Table 65. Impact of Next-Generation Leadership Development Experiences NGLs Reporting Rank Leadership Development Experience Construct¹ Code Rating² Experience³ 1 An increase in responsibility at work CWE lde_ A time when you were held accountable for your decisions and actions lde_ A crisis CWE lde_ A job assignment that challenged you CWE lde_ A success at work CWE lde_ Work experience outside the family business lde_ A boss who was a positive role model MNT lde_ Having a mentor MNT lde_ A failure at work CWE lde_ Advice from a parent MNT lde_ Advice from a family member other than a parent MNT lde_ Formal leadership training program lde_ University-based undergraduate or graduate class FT lde_ Having a leadership coach lde_ A boss who was a negative role model lde_ A project or other assignment for a trade association, civic group, or charitable organization lde_ A project or other assignment for a family council lde_ Leadership position in high school or college FT lde_ Reading a book about leadership lde_ Childhood event lde_ Notes: ¹CWE = challenging work experiences, MNT = mentoring, FT = formal training; ²On a 1-5 Likert scale; ³Out of 100 next-generation leaders (NGLs) To further examine the effects of leadership development experiences, simple linear regression analyses were conducted, regressing each of the experiences that were not included in one of the three leadership development constructs used in the structural equation model on the two dependent variables, leadership effectiveness and work engagement. Results are summarized in Table 66. The results reveal that some of the experiences that were rated as most impactful by the next-generation leaders in the study had no significant effect on their leadership effectiveness as perceived by others or on their self-reported engagement with work. A time when you were held accountable for 329

354 your decisions and actions was rated as the second most impactful development experience by the next-generation leaders, but had no effect on their leadership effectiveness (.03, p =.768) or work engagement (.06, p =.564). This was a somewhat perplexing result, as an earlier study (Miller, 2014) showed a moderately strong effect of being held accountable by others on next-generation leader work engagement. In that earlier study, next-generation leader accountability was rated by observers, so perhaps there is a difference in how next-generation family leaders and their observers perceive being held accountable. Work experience outside the family business was rated as the sixth most impactful development experience, but also failed to demonstrate a significant effect on leadership effectiveness (.16, p =.108) or work engagement (.10, p =.331), although its effect on leadership effectiveness did approach significance at the 90% confidence level. This is particularly important as gaining work experience outside the family firm is one of the most frequently suggested leadership development experiences for next-generation family members contemplating a career in the family firm by family business experts (Breton Miller, Miller, & Steier, 2004; Handler, 1992, 1994; Poza, 2013; Ward, 1997). Because only 83% of the next-generation leaders in the study had experience outside the family firm, a linear regression was conducted using a sample that included only those leaders who did have outside experience. The result was the same with no significant effect of outside work experience on leadership effectiveness (.18, p =.110) or work engagement (.06, p =.609) One the other hand, several of the experiences that were rated lower relative to the others by the next-generation leaders showed meaningful effects on their engagement 330

355 with work in the family firm. As reported above, participation in a formal leadership training program, rated twelfth in impact had no effect on leadership effectiveness (-.01, p = 896), but had a moderate effect on work engagement (.23, p =.023). A project or other assignment for a trade association, civic group, or charitable organization was rated sixteenth by the next-generation leaders, yet had a moderate effect on their engagement with work at the 90% confidence level (.18, p =.072). Reading a book about leadership was rated nineteenth in impact, but had a moderately strong relationship with work engagement (.30, p =.002). A childhood event was rated dead last in impact at twentieth, yet demonstrated a moderately strong relationship with work engagement (.31, p =.002). Implications of how next-generation leaders rated their leadership development experiences will be more fully explored in the discussion section of the paper. Table 66. Linear Regression Results for Leadership Development Experiences Not Included in Leadership Development Constructs LEV¹ LEV¹ UWE¹ UWE¹ Rank Leadership Development Experience Code Rating² Std. Beta p-value Std. Beta p-value 2 A time when you were held accountable for your decisions and actions lde_ Work experience outside the family business lde_ Formal leadership training program lde_ Having a leadership coach lde_ A boss who was a negative role model lde_ A project or other assignment for a trade association, civic group, or charitable organization lde_ A project or other assignment for a family council lde_ Reading a book about leadership lde_ Childhood event lde_ Notes: ¹LEV = leadership effectiveness, UWE = work engagement; ²On a 1-5 Likert scale 331

356 Post-Hoc Analysis 2: A More Complete Explanation of the Effects of Leadership Development Experiences on Leadership Effectiveness and Work Engagement. The second post-hoc analysis integrated the findings from an earlier quantitative study (Miller, 2014) with the findings from the first quantitative study to more fully explore the impact of leadership development experiences on next-generation leader effectiveness and their engagement with work in the family firm. The first step in the process was to create an integrated measurement model and conduct a confirmatory factor analysis in Smart PLS. The combined model was quite complex with many variables and relatively small sample size (n=100), making Smart PLS an appropriate choice for the analysis (Hair Jr et al., 2013; Lowry & Gaskin, 2014). In addition, the post-hoc analysis was primarily exploratory in nature, guided by the results of two qualitative studies (Mccall et al., 1988; Miller, 2012). Smart PLS excels in exploratory research (Gefen et al., 2011; Hair Jr et al., 2013; Lowry & Gaskin, 2014). The following measures were added to those used in the structural equation models for hypothesis testing in Part 1 and Part 2 of the study to create a measurement model for the post-hoc analysis: Family Climate Two additional family climate scales, cognitive cohesion and intergenerational attention were added to open communication to form a positive family climate construct. Cognitive cohesion measures the degree to which family members share norms and values, including attitudes, interests, and beliefs. Intergenerational attention measures the degree to which the senior generation takes an interest in the activities and shows an active concern for the welfare of the younger generation, including being supportive of 332

357 the younger generations goals. Both of these scales come from the Family Climate Scales developed by Björnberg and Nicholson (2007), which also include the open communication and intergenerational authority scales used in the structural equation models in Part 1 and Part 2. Cognitive cohesion achieved a Cronbach s alpha of.89 and intergenerational attention achieved a Cronbach s alpha of.81 in the study conducted to develop the scales (Björnberg & Nicholson, 2007). Family climate items were measured with a five-point Likert-type scale ranging from strongly disagree to strongly agree. Responsibility Responsibility, the degree to which the next-generation leader accepts personal responsibility for his/her actions and decisions, was measured using seven items from The Responsibility Scale (Wood & Winston, 2007). The full ten-item Responsibility Scale achieved a Cronbach s alpha of.97 in Wood and Winston s scale development study. Responsibility items were measured using a five-point Likert-type scale ranging from strongly disagree to strongly agree. Accountability Accountability was measured using three items developed for use in an earlier study conducted on next-generation leader development (Miller, 2014). The resulting accountability scale achieved a Cronbach s alpha of.70 in that study. Accountability items were measured using a five-point Likert-type scale ranging from strongly disagree to strongly agree. Internal Motivation Internal motivation for working in the family business was measured using three items from the Motivation to Work in the Family Business Scale, an unpublished scale 333

358 adapted from the Motivation at Work Scale (Gagné et al., 2010) by Marylène Gagné for use in her research on family business successors and used with her permission. Two items used to measure internal motivation were adapted from the Multidimensional Work Motivation Scale (Gagné, Forest, Vansteenkiste, Crevier-Braud, & Van den Broeck, 2013), an unpublished scale also adapted from the Motivation to Work Scale, and used with permission. Internal motivation items measured the degree to which next-generation leaders felt that working in the family business aligns with their personal values, helps them achieve career and life goals, makes them feel proud, and brings them joy. The internal motivation construct was developed for an earlier study (Miller, 2014) in which it achieved a Cronbach s alpha of.73. Internal motivation items were measured using a five-point Likert-type scale ranging from strongly disagree to strongly agree. Introjected Regulation Introjected regulation was measured using three items from the Motivation to Work in the Family Business Scale referenced above, and one item from the Multidimensional Work Motivation Scale (Gagné et al., 2013). Introjected regulation refers to behaviors that are driven by self-worth contingencies like ego-involvement and guilt and become internalized over time (Gagné et al., 2010). Items included in this study focused on the extent to which next-generation leaders felt pressure to be successful successors to senior-generation family members working in the family business. The introjected construct used achieved a Cronbach s alpha of.71 in an earlier study on nextgeneration family leaders (Miller, 2014). Introjected regulation items were measured using a five-point Likert-type scale ranging from strongly disagree to strongly agree. 334

359 Measurement Model Analysis in Smart PLS Smart PLS assesses the measurement model and structural model simultaneously. Outer model statistics were calculated by Smart PLS to assess the extended measurement model for the second post-hoc analysis. Indicator reliability is demonstrated by significant outer loadings of.708 or higher on the latent variables in a PLS model (Hair Jr et al., 2013). All of the indicators in the post-hoc extended measurement model met this standard except inj_3 (.61), id_2_sq (.63), id_4 (.63), inj_4_sq (.70), lde 11_sq (.67), and uwe_6 (.57). Hair, Hult, Ringle, and Sarstedt. (2013) recommend removing indicators with outer loadings between.40 and.70 only if doing so results in an increase in the composite reliability and/or average variance extracted for the latent variable on which they load above their suggested threshold values. Since this was not the case for these six indicators, they were retained in the model. Composite reliability was above the recommended threshold of.708 for each of the latent constructs in the model, demonstrating their reliability (Hair Jr et al., 2013). Average variance extracted (AVE), which demonstrates convergent validity, was above the recommended threshold of.50 (Hair et al., 2010) for all constructs except internal motivation (.47), which was very close to the threshold and was retained in the model. Discriminant validity for the constructs was demonstrated using three tests. First, the cross loadings table that is part of the Smart PLS output was examined and it was determined that the loading of each indicator on its primary construct was higher than its loading on any other construct (Hair Jr et al., 2013). Two tests recommended by Fornell and Larker (1981) further demonstrated the discriminant validity of the constructs. First, average variance extracted for each construct was greater than its maximum shared 335

360 variance (MSV) with any other construct. This is determined by squaring a construct s highest correlation with any other construct and comparing the result to the AVE. A more stringent test of discriminant validity was conducted by comparing the square root of AVE for each construct with its highest correlation with any other construct as shown in the correlations matrix in Table 68. In all cases, the square roots of the AVEs were higher than their correlations with any other construct, confirming discriminant validity for each of the constructs. Finally, R² values for the endogenous variables in a Smart PLS model are important in assessing measurement models. The model produced R² values of.71 for leadership effectiveness and.45 for work engagement, the two dependent variables of primary interest. While exact interpretations of R² values are dependent upon model complexity and research discipline, R² values of.75 and above are considered substantial, values of are considered moderate, and values of are considered somewhat weak (Hair Jr et al., 2013). Consequently, the R² value for leadership effectiveness (.70) is very close to the threshold considered substantial and the R² value for work engagement (.45) is very close to the threshold considered moderate, although in some disciplines this might be considered strong. Overall, the model exhibits adequate reliability, validity, and explanatory value for meaningful exploration of the direct and indirect effects of leadership development experiences on next-generation leader effectiveness and work engagement. A summary of the measurement model evaluation in Smart PLS (a Smart PLS confirmatory factor analysis) is shown in Table 67. The post-hoc measurement and structural equation model is shown in Appendix L. 336

361 Table 67. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Smart PLS Measurement Model Confirmatory Factor Analysis Results (n=100) Constructs/Items Mean Std. Dev. Std. Regression Weights Std. Dev. Average Maximum t- Composite Variance Shared statistic Reliability Extracted Variance R² Criteria >.708 > 1.96 >.708 >.50 < AVE Accountability (ACCT) Construct (ACCT) ra_11_cub ra_12_cub ra_ Challenging Work Experiences (CWE) Construct (CWE) lde_6_cub lde_8_sq lde_9_cub lde_15_cub lde_18_cub Family Climate (FC) Construct (FC) CogC_CT IAtt_CT OC_CT Formal Training (FT) Construct (FT) lde_2_sq lde_ Intergenerational Authority (Iaut) Construct (IAut) iaut_ iaut_ iaut_ Introjected Regulation (InjReg) Construct (InjReg) inj_ inj_ inj_ inj_ Internal Motivation (IntMot) Construct (IntMot) id_1_sq id_2_sq id_ inj_4_sq int_4_sq

362 Table 67 (continued) Constructs/Items Mean Std. Dev. Std. Regression Weights Std. Dev. Average Maximum t- Composite Variance Shared statistic Reliability Extracted Variance R² Criteria >.708 > 1.96 >.708 >.50 < AVE Leadership Effectiveness (LEV) Construct (LEV) lev_1_sq lev_ lev_3_sq lev_4_sq lev_5_sq Mentoring (MNT) Construct (MNT) lde_3_sq lde_11_sq lde_12_sq lde_13_cub Multi-Rater Emotional and Social Intelligence (MESI) Construct (MESI) AD_CT CM_C OA_CT PETL_CT NGL Self-Rated Emotional and Social Intelligence (NESI) Construct (NESI) NCM_C NIL_C NTW_C Responsibility (RESP) Construct (RESP) ra_2_cub ra_ ra_5_sq ra_6_sq ra_7_sq ra_9_cub ra_10_sq Work Engagement (UWE) Construct (UWE) uwe_ uwe_ uwe_3_sq uwe_ uwe_5_sq uwe_ uwe_7_cub

363 Table 68. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Correlations Matrix (n = 100) ACCT Age CWE CarFul FC FOF FT IAut InjReg IntMot LEV MESI MNT NESI PURP RESP SucPres UWE ACCT 0.86 Age CWE CarFul FC FOF FT IAut InjReg IntMot LEV MESI MNT NESI PURP RESP SucPres UWE Note: Square roots of AVEs on the diagonals

364 Post-Hoc Structural Model Analysis in Smart PLS Collinearity Assessment of Predictor Variables The first step in analyzing an SEM in Smart PLS is to test for collinearity of predictor variables to ensure that they are sufficiently distinct. Tolerance and its inverse, the variance inflation factor (VIF), measure collinearity. Tolerance is simply the amount of variance in an independent variable that is not explained by the other independent predictor variables. Tolerance values below.20 and VIF values above 5 indicate potential collinearity problems (Hair Jr et al., 2013). Smart PLS does not provide tolerance or VIF values, so IBM SPSS Statistics was used to perform a collinearity analysis on the predictor variables in the model, all of which demonstrated tolerance and VIF values well within acceptable limits. See Table 69 for a summary of the collinearity assessments of the predictor variables in the model. Table 69. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Collinearity Assessment of Predictor Variables Accountability Challenging Work Experiences Predictors Tolerance VIF Predictors Tolerance VIF CWE_CT InjReg_C RESP_CT FT_CT MNT_CT Internal Motivation Leadership Effectiveness Predictors Tolerance VIF Predictors Tolerance VIF FC_CT IntMot_CT InjReg_C MESI_CT MNT_CT RESP_CT Responsibility Work Engagement Predictors Tolerance VIF Predictors Tolerance VIF CWE_CT ACCT_CT FC_CT MNT_CT IAut_C NESI_C

365 Significance of Path Coefficients Next, the size and significance of path coefficients for relationships in the model were calculated by bootstrapping 5,000 samples in Smart PLS, as recommended by Hair, Hult, Ringle, and Sarstedt (2013). Values for significant relationships in the model are shown in Figure 26. Insignificant paths were trimmed from the model. A summary of bootstrapping results is provided in Table 70, and discussed below. Table 70. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Significance Test Results of the Structural Model Path Coefficients Path Standard Significance Path Coefficient Deviation t-value Level ACCT UWE *** Age ACCT *** Age FT ** Age LEV ** Age NESI ** CWE ACCT *** CWE NESI *** CWE RESP ** FC IntMot *** FC RESP *** FT CWE *** IAut RESP *** InjReg CWE ** InjReg IntMot *** IntMot LEV * MESI LEV *** MNT CWE *** MNT InjReg ** MNT IntMot ** MNT UWE * NESI UWE *** RESP ACCT *** RESP LEV *** RESP MESI *** Notes: ***p<.01, **p<.05, * p<

366 Effect Size f² The next step in evaluating the predictive power of a structural equation model in Smart PLS is to calculate the relative contribution of each exogenous variable in the model to the coefficient of determination (R² value) of the endogenous variable it predicts. The formula for calculating f² value is as follows: f² = R² included - R² excluded, 1 - R² included where R² included and R² excluded are the R² values of an endogenous latent variable when a selected exogenous latent variable is included in or excluded from the model (Hair Jr et al., 2013). Cohen (1988) suggests that f² values of.02,.15, and.35 respectively, represent small, medium, and large effects. f² effects for all predictor variables in the model are shown in Table 71. Table 71. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis f² and q² Effects Path Path Coefficient f² Effect Value f² Effect Size* q² Effect Value q² Effect Size* ACCT UWE Small 0.04 Small Age ACCT Small 0.06 Small Age FT Small 0.03 Small Age LEV Small 0.03 Small Age NESI Small 0.03 Small CWE ACCT Medium 0.07 Small CWE NESI Small 0.06 Small CWE RESP Small 0.03 Small FC IntMot Medium 0.06 Small FC RESP Medium 0.10 Small FT CWE Small 0.03 Small IAut RESP Small 0.07 Small InjReg CWE Small 0.03 Small InjReg IntMot Medium 0.07 Small IntMot LEV Small 0.02 Small MESI LEV Large 0.34 Medium MNT CWE Medium 0.08 Small 342

367 MNT InjReg Small 0.02 Small MNT IntMot Small 0.02 Small MNT UWE Small 0.02 Small NESI UWE Medium 0.15 Medium RESP ACCT Large 0.49 Large RESP LEV Small 0.04 Small RESP MESI Large 0.52 Large *Cohen, 1988 Predictive Relevance In addition to examining the coefficient of determination (R²) values of the endogenous latent variables in a Smart PLS structural equation model, the predictive relevance of the model should also be evaluated (Hair Jr et al., 2013). A model that demonstrates predictive relevance is one that accurately predicts the data points of indicators of reflective endogenous constructs like leadership effectiveness and work engagement in the model. Predictive relevance is measured using Stone-Geisser s Q² value (Geisser, 1974; Stone, 1974). Q² values larger than zero for an endogenous latent variable indicate that the paths in the model leading to that construct exhibit predictive relevance. The blindfolding feature in Smart PLS was used to calculate Q² values for the endogenous latent variables in the model. All of the endogenous variables exhibited Q² values greater than zero demonstrating the predictive relevance of the post-hoc analysis model. Q² and R² values are shown in Table

368 Table 72. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Endogenous Latent Variable R² and Q² Values Endogenous Latent Variable R² Value Q² Value Accountability (ACCT) Challenging Work Experiences (CWE) Formal Training (FT) Internal Motivation (IntMot) Introjected Regulation (InjReg) Leadership Effectiveness (LEV) Multi-Rater Emotional and Social Intelligence (MESI) NGL Self-Rated Emotional and Social Intelligence (NESI) Responsibility (RESP) Work Engagement (UWE) The q² effect size for each direct path in the model was also calculated. q² effect size indicates the predictive relevance of a specific exogenous latent variable for an endogenous latent variable. The calculation follows the same procedure used to calculate the f² effect size using the following formula: q² = Q² included - Q² excluded, 1 - Q² included where Q² included and Q² excluded are the Q² values of an endogenous latent variable when a selected exogenous latent variable is included in or excluded from the model. Values of.02,.15, and.35 respectively represent small, medium, and large q² effect sizes (Hair Jr et al., 2013). q² effect sizes for the paths in the model are shown in Table 71. Results The second post hoc-analysis was designed to provide a more complete examination of the effects of leadership development experiences on the leadership effectiveness and work engagement of next-generation family leaders. While the results of hypothesis testing using the simple model shown in Figure 25 demonstrated significant 344

369 direct effects of challenging work experiences on next-generation family member leadership effectiveness, and mentoring and formal training on next-generation leader work engagement, results of an earlier study on next-generation family leaders (Miller, 2014), the relatively small effect sizes of the three leadership development constructs, and logic suggest that more factors are involved. Leadership development experiences are not likely to magically produce higher levels of leadership effectiveness or work engagement. It is reasonable to think that such experiences influence leader behaviors, which in turn affect leadership effectiveness and engagement with work. The results of the second post-hoc analysis confirmed that thinking, demonstrating that it is primarily through their influence on other factors that challenging work experiences, mentoring, and formal training influenced the leadership effectiveness and work engagement of the next-generation leaders in the study. In the more complete structural equation model shown in Figure 26, facing and valuing challenging work experiences positively affected the degree to which nextgeneration leaders were perceived by their observers to accept responsibility for their own actions and decisions (.19, p <.05). Acceptance of personal responsibility was a very strong predictor of observer-rated emotional and social intelligence competencies (.74, p <.01), which in turn was the strongest predictor of leadership effectiveness (.64, p <.01). Responsibility directly predicted leadership effectiveness as well, over and above its indirect effect through observer-rated emotional and social intelligence (.22, p <.01). Responsibility also strongly predicted the degree to which next-generation leaders were held accountable by others (.63, p <.01), which in turn positively affected their engagement with work in the family firm (.26, p <.01). Challenging work experiences 345

370 directly predicted the degree to which next-generation leaders were held accountable by others (.25, p <.01), indicating an indirect effect on work engagement (.07, p <.01). Challenging work experiences predicted next-generation leader self-assessment of emotional and social intelligence competencies (.28, p <.01), which in turn strongly affected their engagement with work (.48, p <.01). Introjected regulation, next generation leader motivation reflective of feeling pressure to be a successful successor to a parent or other ancestor in the family business, positively predicted the degree to which next-generation leaders engaged in and valued challenging work experiences (.20, p <.05). The direct effect of engaging in and valuing challenging work experiences on leader effectiveness was suppressed in the more comprehensive model, indicating that it is through these other mediating factors that engaging in and valuing challenging work experiences helps next-generation family leaders develop the leadership skills that predict leadership effectiveness. Mentoring, which in this study included having a mentor or boss who was a positive role model as well as advice from a parent or other family member, had a number of important effects. It was a strong predictor of the degree to which nextgeneration family leaders engaged in and valued challenging work experiences (.39, p <.01). Mentoring positively affected next-generation leader introjected regulation discussed above (.22, p <.05), which in turn affected the degree to which they engaged in and valued challenging work experiences (.20, p <.05). Mentoring predicted the degree to which next-generation leaders indicated they were internally motivated to work in the family firm (.22, p <.05), which in turn positively affected their leadership effectiveness (.12, p <.10). Internal motivation measured the degree to which working in the family 346

371 business helped next-generation leaders achieve their career and life goals, aligned with their personal values, and resulted in feelings of pride and joy. The significance of its effect on leadership effectiveness was very close to the 95% confidence level (t value = 1.94). The direct effect of mentoring on work engagement was not completely suppressed by the other factors in the more complete model, but its significance was reduced to the 90% confidence level (.16, p <.10). So just as with the challenging work experiences, mentoring s influence on next-generation leader effectiveness and engagement with work was primarily through other mediating factors in the model. This was also true for the formal training construct, which in this case reflected university-based training or holding a leadership position in high school or college. After adding the other factors to the model, the only significant effect of formal training was on the degree to which next-generation leaders engaged in and valued challenging work experiences (.23, p <.01). The effect of the control variable age, which was significantly related to work engagement in the simple model (.33, p <.01), was fully mediated by next-generation leader self-assessment of emotional and social intelligence competencies in the more complete model. The results of a mediation test following the Baron and Kenny (1986) approach are shown in Table 73. This result suggests that older next-generation leaders rate themselves higher on leadership behaviors reflective of emotional and social intelligence than younger next-generation leaders, which in turn increases their engagement with work. However, there was no significant effect of age on observerrated emotional and social intelligence, suggesting that older next-generation leader selfassessments may not always be accurate. 347

372 Age also predicted next-generation leader effectiveness in the more complete post-hoc model (.12, p <.05), suggesting that leadership effectiveness improves with age and experience, although the effect size of age was relatively small (f² =.05). Age also had a significant effect (.23, p <.01) on the degree to which the next-generation leaders in the study were held accountable by others. This result may be related to position in the family firm as 75% of the CEOs in the study were between 46 and 65 years of age and 80% of those with lower level positions were between 26 and 45 years of age. It is logical to think that CEOs are more likely to be held accountable by others for results in the family firm. On the other hand, it could mean that the younger next-generation leaders in the study are being denied an opportunity to be more positively engaged in their work in the family firm because being held accountable was predictive of work engagement (.26, p <.01). Finally, age was negatively related to formal training (-.19. p <.05), indicating that undergraduate and graduate university classes and holding leadership positions in high school or college had stronger impacts on the leadership behavior of the younger next-generation leaders in the study than for the older leaders. Table 73. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Mediation Test Results Direct Beta Without NESI Direct Beta With NESI Indirect Mediation Type Relationship Beta Observed Age UWE.18**.10 (ns).10** Full Notes: **p<.01, (ns) = non-significant, NESI = next-generation leader self-assessment of emotional and social intelligence, UWE = work engagement 348

373 Figure 25. Effects of Next-Generation Leader Assessment of Leadership Development Experiences on Leadership Effectiveness and Work Engagement Post- Hoc Analysis Total Effects In Smart PLS, the total effects (direct and indirect) of exogenous variables on endogenous variables provide the greatest insight (Hair Jr et al., 2013). The degree to 349

374 which next-generation leaders engaged in and valued challenging work experiences had significant total effects on six of the other variables in the more comprehensive model: accountability (.37, p <.01), leadership effectiveness (.13, p <.05), observer assessment of next-generation leader emotional and social intelligence competencies (.14, p <.05), self-assessment of next-generation leader emotional and social intelligence competencies (.28, p <.01), responsibility (.19, p <.05), and work engagement (.23, p <.01). Mentoring had significant total effects on nine of the other variables in the complete model: accountability (.16, p <.01); challenging work experiences (.43, p <.01), introjected regulation (.22, p <.05), internal motivation (.29, p <.01), leadership effectiveness (.09, p <.05), observer assessment of next-generation leader emotional and social intelligence competencies (.06, p <.10), self-assessment of next-generation leader emotional and social intelligence competencies (.12, p <.05), responsibility (.08, p <.10), and work engagement (.26, p <.01). Formal training had significant total effects on four of the other variable in the more comprehensive model: accountability (.09, p <.05), challenging work experiences (.23, p <.01), self-assessment of next-generation leader emotional and social intelligence competencies (.06, p <.10), and work engagement (.05, p <.05). See Table 74 for a summary of the total effects of all variables with significant effects on other variables in the post-hoc analysis model. 350

375 Table 74. Next-Generation Leader Assessment of Leadership Development Experiences Post-Hoc Analysis Significance Test Results of the Structural Model Total Effects Path Standard Significance Path Coefficient Deviation t-value Level ACCT UWE *** Age ACCT *** Age CWE * Age FT ** Age LEV ** Age NESI ** Age UWE *** CWE ACCT *** CWE LEV ** CWE MESI ** CWE NESI *** CWE RESP ** CWE UWE *** FC ACCT *** FC IntMot *** FC LEV *** FC MESI *** FC RESP *** FC UWE ** FT ACCT ** FT CWE *** FT NESI * FT UWE ** IAut ACCT *** IAut LEV *** IAut MESI *** IAut RESP *** IAut UWE ** InjReg ACCT * InjReg CWE ** InjReg IntMot *** InjReg LEV ** InjReg NESI * InjReg UWE * IntMot LEV * MESI LEV *** MNT ACCT *** MNT CWE *** 351

376 MNT InjReg ** MNT IntMot *** MNT LEV ** MNT MESI * MNT NESI ** MNT RESP * MNT UWE *** NESI UWE *** RESP ACCT *** RESP LEV *** RESP MESI *** RESP UWE *** Note: ***p<.01, **p<.05, * p<.10 Discussion: Part 2 The second phase of the study was designed to explore the effects of a variety of leadership development experiences on the degree to which next-generation family members build the skills they need to be effective business leaders and who derive energy, inspiration, and fulfillment from their work in the family enterprise. The 20 experiences explored were derived from McCall, Lombardo, and Morrison s landmark qualitative study (1988) of nearly 200 leaders in large non-family companies and an earlier qualitative study (Miller, 2012) of 37 leaders in private mid-market family-owned firms. The goal of this phase of the study was to determine if quantitative measures of experiences leaders identified as important to their development as leaders in the two previous qualitative studies could predict next-generation family leader effectiveness and/or their engagement with work in the family business. While the results suggest that challenging work experiences predict next-generation leadership effectiveness, and that mentoring and formal training predict work engagement, the most valuable insights came from a post-hoc analysis that combined these three leadership development constructs 352

377 with other measures of next-generation leader behaviors and characteristics that were shown to influence leadership effectiveness and work engagement in an earlier study (Miller, 2014) to form a more comprehensive structural equation model. The focus of the following discussion is on the effects of leadership development experiences on leadership effectiveness and work engagement. For a more complete discussion of the other variables in the post-hoc analysis model, see my earlier quantitative study on nextgeneration family business leaders (Miller, 2014). The major findings of this phase of the study are summarized and discussed below. Challenging work experiences help next-generation family leaders develop leadership skills and positively engage with their work in the family firm. Consistent with Kahn s (1990) theory that people engage more fully with challenging work because it is more meaningful, the results of the study suggest that next-generation leaders learn valuable leadership lessons from an increase in responsibilities at work, successes and failures, job assignments that stretch them, and crises. Engaging in and valuing such challenging work experiences predicts the degree to which they accept personal responsibility for their own actions and decisions, which in turn affects their display of emotional and social intelligence competencies which are so strongly related to leadership effectiveness. The implication is that next-generation leaders need to be stretched and challenged if they are to become effective leaders in the family firm. This finding is consistent with the literature on emotional and social intelligence, which suggests that the competencies associated with emotional and social intelligence can only be learned through experience, particularly vivid experiences (Cherniss & Adler, 2000) like facing challenging situations at work. This is because our emotions reside in the 353

378 more primitive part of our brain, particularly the amygdala, while cognitive processes take place in the neocortex, the more recent part of our brain to evolve (Boyatzis & McKee, 2005; Cherniss & Adler, 2000; Goleman et al., 2002). The amygdala does not understand words and concepts, so it is must be trained through lived experience rather than through methods like reading or listening to lectures, which are more effective for learning cognitive skills processed in the neocortex, which does understand words and ideas (Cherniss & Adler, 2000). Learning emotional and social intelligence competencies is important to leaders in any setting but it is of supreme importance in a family business setting. While the development of emotional and social skills for everyone is strongly influenced by what happens in our families of origin as we grow up (Goleman et al., 2002; Kerr, 1988), most people work in settings where family members are not present, thus presenting opportunities to observe, practice, and learn different ways of responding to events at work. For next-generation family leaders working in the family business, however, family members continue to exert influence in their roles as other leaders, employees, and/or owners of the family business. Family systems theory suggests that patterns of emotional behavior and interactions with family members established during childhood are likely to continue (Kerr, 1988; Poza, 2013), unless new experiences teach new lessons. The next-generation leader who is fortunate enough to grow up in a family environment that fosters the development of emotional and social intelligence is lucky indeed, but even they need opportunities to differentiate themselves from their families of origin to achieve the healthiest emotional functioning, and by extension become effective leaders. This differentiation of self that family systems pioneer Murray Bowen 354

379 identified as critical to individual and family functioning (Kerr, 1988) can be more difficult for next-generation family business leaders because much of their personal identity is defined by their membership in a successful business-owning family (Björnberg & Nicholson, 2007). The results of this study suggest that an effective way for next-generation leaders to learn the emotional and social skills they need to become capable leaders is to pursue challenging work assignments for which they accept personal responsibility. Unfortunately, next-generation family leaders in family firms are often shielded from the risks of failure which come with difficult assignments (Miller, 2012; Poza, 2013). Senior generation family members may unintentionally deny the next generation of family leaders the very opportunities they need to develop leadership skills in an effort to protect them from the struggles of overcoming obstacles or the pain of experiencing failure. Sometimes the denial of those opportunities is not so altruistic, as strong-willed entrepreneurs who found or grow a family firm may feel threatened by ceding responsibility to the next generation (Kets de Vries, 1985, 1994), or do not want to risk their own reputations if a next-generation leader experiences a failure (Miller, 2012). The results of the study also suggest that challenging work experiences have moderately strong effects on next-generation leader self-assessment of emotional and social intelligence competencies and on the degree to which they are held accountable by others in the family firm, both of which increase the degree to which they are positively engaged with the their work in the family business. Higher self-perceptions of leadership behaviors reflect self-efficacy (Bandura, 1982), which has been shown to be positively related to engagement with work (Maslach, Schaufeli, & Leiter, 2001; Schaufeli & 355

380 Salanova, 2007) in the emerging literature on positive work engagement and its opposite, burnout. It is logical to think that next-generation leaders who experience and learn from challenging work experiences, including successes and failures, gain a sense of selfefficacy as a result. So the study results suggest that yet another benefit of exposing next-generation family leaders to difficult challenges is an increase in self-confidence, which in turn increases the degree to which their work in the family firm infuses them with positive energy, inspiration, and fulfillment. There is a dark side to this finding, though. As was demonstrated in Part 1 of the study, next-generation leaders who overrate their leadership behaviors diminish their leadership effectiveness and limit the benefits of being positively engaged with their work in the family firm. Next-generation leaders who gain self-confidence from successfully meeting the challenges of difficult assignments risk becoming overly confident or arrogant, sometimes referred to as hubris in the literature (Hiller & Hambrick, 2005). Leader over-confidence has been shown to negatively affect decisionmaking and negotiating (Bazerman & Neale, 1982; Neale & Bazerman, 1985), and hubris among corporate CEOs has been shown to inflate prices paid for acquisitions (Hayward & Hambrick, 1997; Roll, 1986). Entrepreneurs who successfully build or expand family firms can also become overconfident as a result of overcoming the enormous challenges of founding or growing a business (Kets de Vries, 1985, 1994). That overconfidence can lead to serious leadership mistakes by encouraging them to believe that everything they touch will turn to gold. They can develop so much confidence in their own leadership ability that they fail to allow next-generation family leaders opportunities to make decisions and pursue 356

381 their own challenges in the family firm (Kets de Vries, 1994; Poza, 2013). So while the results of the study suggest that exposing next-generation family leaders to challenging work experiences is valuable for helping them learn leadership skills and achieve the selfefficacy that is so important to effective leadership and positive engagement with work, the self-confidence gained from those experiences needs to be held in check by accurate self-awareness, a cornerstone of emotional intelligence (Goleman et al., 2002). The study also demonstrated a moderately strong link between next-generation exposure to challenging work experiences and the degree to which they are held accountable by others, which in turn positively predicted their engagement with work. To some, it may seem paradoxical that being held accountable may actually increase the positive energy and inspiration derived from one s work. But being held accountable is a form of recognition, which has been found to be an antecedent of work engagement (Saks, 2006), so it is not irrational to think that being held accountable by others increases positive engagement with work. How inspiring is it to overcome challenges if no one else is aware of the achievement? Here again, next-generation family firm leaders are at risk, as they are often not held accountable for their actions or decisions to the same extent that they would be held accountable in a business not owned by their family, or they are given leadership positions without real responsibility and accountability (Miller, 2012; Poza, 2013; Ward, 1997; Ward, 2011). Most family business owners who want to pass the business on to the next-generation of family members recognize that it is critical for them to be fully engaged with their work in the family firm and want them to derive the positive benefits of that engagement, but they sometimes make the mistake of trying to make it too easy for the next generation by giving them assignments with little real 357

382 responsibility or accountability. The results of this study suggest that providing emerging next generation family leaders with challenging assignments that stretch them, and holding them accountable for results, is a more effective strategy. It turns out that the other two leadership development constructs explored in this study, mentoring and formal training which are discussed next, positively influence the degree to which next-generation leaders engage in challenging work in the family business. Mentoring encourages next-generation family leaders to take on and learn from challenging work experiences, which in turn improves their leadership effectiveness and increases their engagement with work in the family firm. The effects of mentoring on next-generation family leader development are among the study s more important findings. While research on the effects of mentoring on the development of leadership skills are mixed, it has been suggested that leaders in large public companies may not stay in one position or work for the same boss long enough to develop meaningful mentoring relationships (Mccall et al., 1988). Family-owned enterprises, where family and non-family leaders often spend most of their careers in one firm, are more likely to provide opportunities to form longer-lasting and more intimate relationships. The results of this study provide support for the notion that mentoring may be more likely to play an important role in family business setting than in a public company, as mentoring showed meaningful effects on the degree to which the nextgeneration leaders in the study engaged in challenging work experiences and in their motivation for working in the family firm. 358

383 Mentoring provides psychosocial functions built on trust, intimacy, and personal bonds, and include acceptance, confirmation, counseling, friendship, and role modeling. The psychosocial functions of mentoring help protégés grow personally and professionally by helping them develop a sense of personal identity, self-worth and selfefficacy (Ragins & Kram, 2007). It stand to reason, then, that the increased selfconfidence gained from a meaningful mentoring relationship would make it more likely that next-generation leaders would pursue challenging work assignments. Mentoring also operates through career functions specifically intended to help emerging leaders prepare for hierarchical advancement. Career functions include coaching, sponsoring, increasing positive exposure and visibility, and offering challenging assignments (Ragins & Kram, 2007). This suggests that many of the nextgeneration leaders in our study are likely to have had mentors who made sure they were exposed to challenges specifically intended to help prepare them for higher levels of responsibility in the family firm. As a result, this increased the chances that they would benefit from the multiple effects of challenging work experiences on their development of leadership skills and work engagement discussed above. This finding is of great importance as it provides support and an explanation for a key finding in an earlier qualitative study that suggested that mentoring was a meaningful differentiator between exceptional and less effective next-generation family firm leaders (Miller, 2012). The less effective leaders in that study were often shielded from the consequences of their actions and decisions and from the risks of failure, and they reported fewer assignments with real reasonability and accountability. They also reported fewer mentoring relationships, with only 14% mentioning them in interviews. 359

384 On the other hand, the majority of the next-generation leaders in that study (88%) reported a meaningful mentoring relationship. The more effective leaders also recounted difficult challenges at work from which they learned impactful leadership lessons. This study establishes a link between mentoring relationships and the likelihood that nextgeneration leaders in family firms will be exposed to the kinds of challenging work experiences that help them develop leadership skills and become positively engaged with their work in the family firm. Equally interesting is the finding that mentoring influenced next-generation leader motivation for working in the family firm, which is discussed next. Mentoring increases next-generation family leader motivation, which in turn improves their leadership effectiveness and increases their engagement with work in the family firm. Mentoring had meaningful effects on two forms of next-generation family leader motivation for working in the family firm. It predicted the degree to which next-generation leaders were motivated by factors self-determination theory labels identified regulation (Deci & Ryan, 2008; Gagné & Deci, 2005). Identified regulation (labeled internal motivation in the study models and tables) refers to engaging in a behavior or committing to an activity based on its perceived meaning or its relation to personal goals. In this study, mentoring positively influenced the degree to which nextgeneration leaders indicated they were working in the family firm for such reasons, including an opportunity to fulfill career plans and life goals, and to work in a job aligned with their personal values. Mentoring also influenced next-generation motivational factors self-determination theory labels introjected regulation (Deci & Ryan, 2008; Gagné et al., 2010). 360

385 Introjected regulation refers to engaging in activities in order to increase feelings of selfworth or to avoid guilt. The next-generation leaders in this study indicated that they were also motivated by such factors, including a strong desire to succeed in the family business, a fear of failure because their work in the family firm is so much a part of their lives, and proving to themselves that they can meet the challenges of their jobs. While these motivational factors could apply equally to leaders working in non-family businesses, mentoring for the next-generation leaders in this study also influenced the pressure they feel to be successful successors to parents or other ancestors who founded the family business, a motivational factor that could only apply to family members working in a family-owned firm. Both identified and introjected regulation are extrinsic in nature, but they differ in the extent to which they have been internalized (Deci & Ryan, 2008; Gagné & Deci, 2005). People who are extrinsically motivated engage in activities in order to achieve instrumental goals, rather than for the purely intrinsic appeal of the activity itself. Identified regulation is more internalized than introjected regulation because the behaviors it motivates are more reflective of personal goals and identities. Introjected regulation has also been internalized but has not been fully accepted as one s own. Selfdetermination theorists Deci and Gagne have said of introjected regulation, With this type of regulation, it is as if the regulation were controlling the person (Gagné & Deci, 2005). The more internalized the motivation, the more autonomous it becomes. In other words, the more a person internalizes the motivation the more likely they are to exhibit behaviors associated with it on their own, without supervision or pressure from others. Research has shown that autonomous forms of motivation produce better work-related 361

386 outcomes like performance and job satisfaction than more external forms of motivation, labeled controlled motivation, in self-determination theory. Both identified regulation and introjected regulation are more internalized than fully external regulation, which refers to rewards and punishments contingent on behaviors. Examples of external regulation include material and social rewards like money, status, and meeting the expectations of others, which result in purely controlled motivation. Self-determination theory places these different types of motivation along a continuum ranging from fully controlled to fully autonomous. Identified regulation is moderately autonomous, while introjected regulation is moderately controlled (Gagné & Deci, 2005), thus both forms of the motivation identified by the next-generation leaders in this study would be expected to produce more favorable results than purely controlled or external forms of motivation, with identified regulation more likely to produce positive results than introjected regulation. Self-determination theory further postulates that satisfaction of three basic psychological needs facilitate the degree to which motivations are internalized: competence, autonomy, and relatedness to others (Gagné & Deci, 2005). The results of this study suggest that the mentoring relationships reported by next-generation family leaders support their internalization of motivating factors for working in the family business by providing a necessary source of personal connection with others, in this case mentors who may include other family members to whom they look for advice and counsel. According to Gagné and Deci (2005), competence and relatedness support internalization of behaviors driven by motivating factors, but autonomy is necessary for more complete internalization. This may explain why the two motivational constructs in 362

387 the study have different effects. Internal motivation (reflective of identified regulation) has a direct positive effect on next-generation leadership effectiveness. It is more internally driven by next-generation leader personal values and desire to satisfy career and life goals. Leaders who exhibit behaviors that are authentic expressions of their values are seen as more effective by those with whom the work (Avolio & Gardner, 2005). On the other hand, introjected regulation positively affects the degree to which the next-generation leaders in the study take on and value challenging work assignments. Because introjected regulation in this study is driven more by a strong desire to succeed in the family business as a successor to a parent or other family member, it is logical to think that next-generation leaders would be motivated to take on challenges to demonstrate that they are up to the task. The good news in the study is that by doing so they increase their chances for learning leadership skills and enjoying the rewards of positive engagement with their work in the family firm. Another interesting finding in the study was that introjected regulation was predictive of internal motivation (.35, p <.01). This is important because more controlled extrinsic forms of motivation like introduced regulation often have negative outcomes (Gagné & Deci, 2005), while in this study introjected regulation had positive outcomes. Perhaps in a family business, next-generation family leader motivation to become a successful successor can become more internalized than might be the case for a leader who feels pressure to succeed in a non-family business, thus having a stronger effect on a next-generation leader s career plans, life goals, and personal values. An earlier qualitative study (Miller, 2012) provides some support for this idea, as the more effective next-generation family leaders in that study often recounted long periods of 363

388 reflection in which they came to understand that their personal values matched the values expressed in the operation of their family s business. In addition, in their work on motivation at work, Deci and Gagné (Gagné & Deci, 2005) assert that there are ways to make extrinsic forms of motivation more autonomous to produce positive effects. They suggest that encouraging relatedness in the workplace is one of the strategies for converting extrinsic motivations into more internalized autonomous motivation, and encourage more research in this area. This study makes a contribution to motivation theory and the family business literature by demonstrating that mentoring, a strong expression of relatedness, may help to convert introjected regulation into the more internalized autonomous identified regulation in a family business context. This would provide a meaningful avenue for further study. Additional insight on the effects of mentoring on next-generation leader motivation can be gleaned by returning to the central tenets of intentional change theory. The study results support the idea that having a mentor helps next-generation leaders in family firms achieve the first of intentional change theory s fived discoveries, envisioning an ideal-self (Boyatzis, 2008; Boyatzis & Akrivou, 2006), through its positive influence on internalized identified regulation, which reflects one s personal values and sense of identity (Gagné & Deci, 2005). Because having an influential mentor was shown to increase the degree to which next-generation leaders pursue and value challenging work experiences through its effect on self-determination theory s introjected regulation form of motivation, it is logical to think that mentoring helps them achieve intentional change theory s other four discoveries as well. A mentor may motivate a next generation leader to identify gaps between the ideal self and real self, help develop a plan 364

389 for learning and practicing new leadership skills to close those gaps through challenging work experiences, and provide the kind of encouragement and support needed to sustain the change process (Boyatzis, 2006, 2008). While the literature is mixed on the effects of mentoring on leader development in general, the results of this study suggest that it can be an effective strategy for helping next-generation family leaders develop the leadership skills they need to be effective and to discover meaning, fulfillment, and inspiration in their work for the family firm. Perhaps this is an important advantage for family members who decide to pursue a career in their family s business. The opportunity to develop long-term mentoring relationships with family or non-family leaders while growing up and after they enter the family firm may provide a unique opportunity to learn from wise experienced leaders that is not as available to those who work for public or private non-family companies. Indeed, nonfamily companies tend to rely more on non-relationship based form of leadership development (Fiegener et al., 1994), including formal training, the next area discussed. Formal training encourages next-generation family leaders to take on and learn from challenging work experiences. The direct effect of formal training on nextgeneration leader work engagement was suppressed by other factors in the more complete post-hoc structural equation model. However, the positive effect of formal training on the degree to which next-generation leaders engaged in and valued challenging work experiences remained (.23, p <.05). As a result, formal training had positive total effects on next-generation leader accountability, self-assessment of emotional and social intelligence competencies, and engagement with work, through its effect on challenging work experiences. This finding is consistent with previous research on the benefits of 365

390 formal training. While formal training is rarely mentioned by leaders as a key factor in their development of leadership skills, it does have a positive effect on their selfconfidence (Mccall et al., 1988). It stands to reason that increased self-confidence would make it more likely that next-generation family leaders would feel up to the task of tackling challenging work assignments in the family firm. It is important to note that the latent construct reflective of formal training in this study only included training received through university undergraduate or graduate programs and leadership positions in high school or college. An item that represented participation in and the impact of formal training programs outside a university setting did not load on the construct used, so the result should be viewed with that limitation in mind. This likely reflects the fact that only three quarters of the next-generation leaders in the study reported having participated in any type of formal leadership training outside of a university setting. This is not surprising as research on methods most commonly used to train next generation leaders indicates that non-family businesses rely on formal training programs to develop leaders to a greater degree than family businesses, which tend to rely more on personal relationship-centered (Fiegener et al., 1994) training like mentoring, which was found to be quite important in this study. While leaders in both family and non-family businesses rarely mention formal leadership training as important to their development as leaders, there is evidence that this may be more the result of poor program design than an inherent flaw in the concept of formal training as a way to teach valuable leadership skills. Leadership development experts Conger and Benjamin (Conger & Benjamin, 1999) conducted extensive research on how formal leadership training has evolved over several decades and found seven best 366

391 practices when individual skill development, the focus of this study, is the goal: (1) use of a single well-delineated leadership model, (2) use of a participant selection process with clear criteria, (3) pre-course preparation, (4) use of personalized 360-degree feedback to reinforce learnings, (5) use of multiple learning methods, (6) use of multiple sessions over extended learning periods, and (7) organizational support systems to reinforce learnings. A leadership development program at the Weatherhead School of Management at Case Western Reserve University employing the first six of these practices has produced significant increases in the emotional and social intelligence competencies of MBA students, providing additional support for Conger and Benjamin s findings (Boyatzis, Passarelli, & Wei, 2013; Wheeler, 2008). Consequently, family business researchers and practitioners are encouraged to view the results of this study not as an indication that formal training is of no value in helping next-generation leaders develop leadership skills, but rather as incentive to closely examine the design of formal leadership training programs to select or create those that are more likely to produce positive results. Indeed, the results of this study indicate that next-generation family leaders themselves may not always evaluate the value of leadership development experiences accurately, the subject of the final discussion topic. Next-generation leader perceptions of the impact of some leadership development experiences do not predict how they actually affect their leadership effectiveness or engagement with work. One of the more interesting findings of the study was that how next-generation leaders rate the impact of their experiences may not always be accurate. Two of the most highly self-rated experiences in the study that did 367

392 not load on one of the latent variables showed no significant effect on next-generation leader effectiveness or engagement with work. The two that were rated dead last and failed to load on one of the latent variables demonstrated significant effects on the degree to which the next-generation leaders in the study indicated they were positively engaged with the work in the family firm (see Table 66). A time when you were held accountable for your decisions and actions, was rated as the second most impactful leadership development experience by study participants, but demonstrated no effect on leadership effectiveness or work engagement. This was a somewhat perplexing result, as the degree to which next-generation leaders are held accountable by others as perceived by their observers was a moderately strong predictor of their engagement with work (.25, p <.01). Perhaps some of the nextgeneration leaders in the study who indicated that such a time was impactful are not held accountable by others in their family businesses on a regular basis. Or perhaps their perception of what it means to be held accountable is not the same as the perceptions of those with whom they work. In either case, the results suggest that clearly defining nextgeneration family leader accountability and being consistently held accountable for the standards of performance established is likely to have a salutary effect on the degree to which next generation leaders derive the positive benefits of being engaged with their work in the family firm. The most unexpected result of the study was that work experience outside the family business demonstrated no significant effect on leadership effectiveness or work engagement, although its effect on leadership effectiveness did approach significance at the 90% confidence level (.16, p =.108). Gaining outside work experience is almost 368

393 universally recommended by family business experts as an effective way for nextgeneration family members to develop leadership skills (Breton Miller et al., 2004; Handler, 1992, 1994; Poza, 2013; Ward, 1997). The theory is that next-generation leaders are more likely to receive accurate feedback and job assignments with real responsibility and accountability in work contexts in which their family name has no special significance. Perhaps this finding is similar to the finding on formal training in that the effect of outside experience may depend largely on the quality of the experience. If the outside experience gained does not really afford the next-generation leader with the kind of intended challenge, responsibly, accountability, and objective feedback intended, then it is unlikely it would provide the desired benefits. Perhaps a well-designed experience within the family business provides more value to a next generation leader than a poorly conceived or executed experience outside the family firm. The issue may be more one of experience design and content than the place where the experience is gained. Since most of the research on the value of outside experience for next generation family leaders is qualitative, this issue deserves additional rigorous research. Reading a book about leadership was rated nineteenth out of the twenty experiences included in the study, but had a moderately significant effect on nextgeneration leader work engagement (.30, p <.01). Perhaps reading books about leadership principles, effective leaders, and ways to develop leadership skills inspires next-generation leaders to more fully engage with their work in the family firm, even though the leaders in this study did not rate reading about leadership as particularly important to their development. It is also possible that the effects of reading about leadership subtly influence the ways next-generation leaders think about their roles in the 369

394 family firm and the possibilities they have to emulate successful leaders about whom they read. Perhaps the benefit is more inspirational than instructional. Additional research specifically designed to examine the effects of reading leadership books on nextgeneration family leader work engagement may help to more fully understand the relationship. Finally, while a childhood event, the leadership development experience rated dead last by the next-generation leaders in the study, demonstrated no effect on their leadership effectiveness, it meaningfully predicted their positive engagement with their work in the family firm (.31, p <.01). This result may be quite important for businessowning families who want their family enterprises to succeed through multiple generations of family leadership and ownership. It suggests that the process of inculcating an appreciation for the family firm may well begin early in childhood for next-generation family members. An interesting study conducted by Björnberg and Nicholson (2012) showed that children who grow up in business-owning families often develop strong emotional bonds with the family business, even if they later decide not to go to work for the family firm. In addition, early exposure to the family business is often recommended by family business experts as important in preparing family members for future ownership and leadership responsibilities in the family firm (Breton Miller et al., 2004; Handler, 1994; Ward, 2004b). The finding of this study that childhood experiences affect later work engagement in the family firm suggests that additional research to explore how specific types of early exposure to the family business influence nextgeneration feelings and attitudes toward the family enterprise and their effects on the 370

395 possibilities for energizing, inspiring, and fulfilling careers in the family business would be of great benefit. Limitations and Future Research Next-generation leaders represented in the study were self-selected since they voluntarily responded to invitations to participate, thus they did not comprise a strictly random sample. This introduces the threat of external validity, the ability to generalize results across all family businesses (Shadish et al., 2002), so the results should be viewed with the possibility of that limitation in mind. Next-generation leaders also nominated their own multi-raters introducing the possibility of social desirability in multi-rater responses, a potential threat to construct validity, the ability to generalize causes and effects (Shadish et al., 2002), although this is a risk inherent to most 360- degree leadership surveys. Nonetheless, there was sufficient variation in multi-rater evaluations to provide confidence in the reliability of our results. As with most studies of this nature, the constructs were measured at a specific point in time. Concepts like leadership effectiveness and engagement with work develop over time, so theoretically a longitudinal study would be ideal. However, there is enough variation in the age of the next-generation leaders who participated and in the generational stage of ownership of their family firms to provide confidence in the reliability of the findings. The construct used to test the effects of formal training represents another study limitation, as it only reflected the impact of university undergraduate and graduate classes and leadership experiences in high school or college. Additional research designed to identify a more comprehensive measure and to explore the efficacy of a wider variety of formal training experiences would provide greater insight. 371

396 A study designed to compare the self-awareness of next-generation family firm leaders with leaders of non-family businesses and its effect on their leadership effectiveness and engagement with work would make a valuable contribution to family business and leadership research. Such a study could also explore differences in the amount and perceived quality of feedback on leadership behaviors received by nextgeneration family and non-family business leaders to ascertain its effect on the degree to which they exhibit self-awareness and leadership behaviors reflective of the emotional and social intelligence competencies that so strongly predict leadership effectiveness. More in-depth research on the on the effects of work experience outside the family firm on next-generation family leader development may also provide useful insights. Exploring the exact nature of outside work experiences may help to identify factors that differentiate those that result in valuable leadership lessons from those that don t. Additional research designed to explore the effects of different types of formal training programs is also suggested, since there is evidence to suggest that formal training design may determine its effectiveness, and because it is an underutilized form of nextgeneration leader development in family businesses. Conclusion and Implications for Practice Many leaders spend their entire careers without knowing how others perceive their leadership behaviors (Bell, 1973; Boyatzis & McKee, 2005). This is a particularly significant risk for next-generation leaders in family firms, who are less likely to get accurate feedback on their leadership behaviors than their counterparts in non-family businesses (Poza, 2013). The results of this study demonstrate that next-generation family leaders who overestimate their emotional and social intelligence competencies 372

397 seriously undermine their leadership effectiveness. Not only does their failure to recognize the need to improve their leadership skills threaten to derail their own careers (Boyatzis & McKee, 2005; McCall & Lombardo, 1990), but it puts the future of the family business at risk as well (Ward, 1997). The results also indicate that next-generation leaders who lack self-awareness are also less likely to be fully engaged with their work in the family firm, thus deriving less energy, inspiration, and sense of fulfillment from that work than would be the case if they had a more accurate understanding of their leadership behaviors. This was true for the next-generation leaders who overrated their leadership behaviors as well as for those who underestimated them. Perhaps those who overestimate their leadership skills are less engaged because they are unaware of their need to improve and put less effort into work experiences that would teach leadership lessons. For them a lack of self-awareness may create less of a drive to survive (Boyatzis, 2013), thus denying themselves the rewards that come from being fully engaged with work. Those who underestimate their leadership skills may be too hard on themselves, over-striving to improve. For them, the drive to thrive (Boyatzis, 2013) may be so strong that over time they begin to burn out and experience less joy and satisfaction from their work in the family firm than would be possible if they had a greater sense of the positive impact of their leadership behavior. Whatever the reasons, business-owing families who hope next-generation family successors will derive personal fulfillment and joy from working the family firm would be wise to help them achieve accurate self-awareness. The good news is that the study results suggest a number of strategies that can be employed to help next-generation family members develop the leadership skills they need 373

398 to become effective leaders of the family enterprise and enjoy the benefits of being fully engaged with their work for the family firm at the same time. A first step in helping them achieve greater self-awareness is through 360-degree evaluations of their leadership behaviors. Consistent with studies of leaders in other contexts (Boyatzis & McKee, 2005; Cherniss & Adler, 2000; Goleman et al., 2002), observer ratings of next-generation family leader emotional and social intelligence competencies in this study were strong predictors of their leadership effectiveness, fully mediating the much weaker relationship between next-generation self-rated behavior and leadership effectiveness. Helping nextgeneration family leaders become aware of and understand the gaps between their selfperceptions of leadership behaviors and how others experience them, the second discovery in intentional change theory, can motivate them to learn more effective ways of leading. While this discovery can set any leader on a path of positive change, it is perhaps even more important for next-generation leaders in successful family firms because they are so often denied the benefits of frank and objective feedback. The study results further suggest that open communication in the business-owning family itself helps next-generation family leaders develop higher levels of self-awareness and positively affects the degree to which next-generation leaders exhibit the emotional and social intelligence competencies that are so strongly predictive of leadership effectiveness. Holding regular family meetings that include family members inside and outside the family business is an effective way of fostering open and transparent communication in the family (Poza, 2013; Ward, 2004b, 2011) Using family meetings to create a family culture that provides a safe environment for discussing sensitive topics actually models the expression of emotional and social intelligence competencies, which 374

399 next-generation family members are likely to emulate. Business-owning families who want to help next-generation family members develop accurate self-awareness and learn emotional and social intelligence skills would be wise to invest time and effort in holding regular well-planned family meetings specifically designed to foster open communication. Study results also support the idea of including educational sessions on communication skills and emotional and social intelligence in those meetings. The study provides empirical evidence that a number of specific leadership development strategies are effective in helping next-generation family leaders develop leadership skills and positively engage with their work in the family firm. Providing challenging work assignments that include increases in responsibility, opportunities to succeed and fail, and managing crises help next-generation family leaders learn to accept personal responsibility, develop self-confidence, and learn and practice the emotional and social intelligence competencies that are so closely linked with leadership effectiveness. Sadly, senior generation leaders in family firms often shield next-generation family members from these kinds of challenges, unintentionally denying them the very experiences they need to become effective leaders of the family enterprise. It is hoped this research will serve as a clarion call for business owning families to provide nextgeneration family members with opportunities to succeed or fail on their own through age and experience-appropriate work assignments - and for next-generation leaders to seek out such experiences whether or not they are offered. The study also showed that mentoring influences next-generation family leader motivations for working in the family firm. The results suggest that mentoring helps next-generation leaders determine if working in the family firm will help them achieve 375

400 their own career and life goals and allow them to authentically express their personal values, a leadership behavior that predicts effectiveness. Mentoring also created a strong desire in the next-generation leaders who participated in the study to be successful successors in the family business, which in turn motivated them to engage in the types of challenging work experiences that teach key leadership lessons. The opportunity for meaningful mentoring relationships represents a real advantage for next-generation leaders in family firms as opposed to their counterparts in non-family businesses, who are often not in one job long enough to form a personal relationships with a trusted mentor. Next-generation family leaders are encouraged to seek out mentoring relationships with respected family and non-family leaders in the family business who can provide candid feedback, assign challenging work responsibilities, and support their efforts to develop leadership skills. Next-generation and senior family business leaders should not overlook the potential of formal training opportunities. In this study, participation in university-based classes increased the likelihood that next-generation leaders would engage in and learn from challenging work experiences, suggesting that formal education may increase nextgeneration leader self-confidence to tackle stretch assignments. The key to effective formal training programs is in their design. Family business practitioners should consider the seven best practices Conger and Benjamin (1999) found in their study of formal leadership programs included in the discussion section of the paper in evaluating outside formal training programs or in creating in-house programs for their next-generation family leaders. 376

401 The final word to family business practitioners is that the task of preparing nextgeneration family members for leadership responsibilities is too important to leave to chance. This study provides empirical evidence that next-generation leaders who are provided with challenging work assignments, meaningful mentoring relationships, the right kind of formal training, and opportunities to receive honest feedback on their leadership behaviors are more likely to become self-aware, effective leaders who derive positive energy, inspiration, and fulfillment form their work in the family firm. Senior generation family leaders are encouraged to collaborate with next-generation family members who are thinking about or already working in the family business to create specific leadership development plans that incorporate the experiences the study shows to be effective. Next-generation family members are encouraged to take responsibility for their own development whether or not the senior generation expresses interest. Ultimately, the type of leader you become and the benefits you derive from working in the family firm is up to you. 377

402 CHAPTER V: INTEGRATED FINDINGS AND DISCUSSION Summary of Integrated Findings The results of all three phases of the study were triangulated to produce six major integrated findings, which are discussed next. It turned out that family climate influenced almost every other factor that predicted next-generation leader effectiveness or work engagement, making it the most salient of the study s findings. A summary of the integrated findings and the research questions they address is provided in Table 75. Table 75. Integrated Findings Finding 1 Finding 2 Finding 3 Finding 4 Finding 5 Finding 6 Integrated Finding Emotional and social intelligence drives next-generation family leader effectiveness. Accepting and exercising personal responsibility is central to the development of next-generation family leader emotional and social intelligence. Family climate and challenging work experiences influence the degree to which next-generation family leaders accept and exercise personal responsibility. Next-generation family leader self-assessment drives their work engagement, but the effect is attenuated by lack of self-awareness. Accurate self-awareness is predicted by open communication in the family. The degree to which next-generation family leaders are held accountable by others influences their engagement with work and is predicted by family climate. Family climate influences next-generation family leader motivations for working in the family business. The nature of those motivations affects their leadership effectiveness, work engagement, and the organizational climate of the family business. Research Questions Addressed Q1, Q2 Q1, Q2, Q3 Q2, Q3, Q4, Q6 Q2, Q3, Q4, Q5 Q2, Q3, Q4 Q2, Q3, Q4 Emotional and social intelligence drives next-generation family leader effectiveness. All three phases of the study demonstrated the importance of observer- 378

403 rated emotional and social intelligence competencies in predicting the leadership effectiveness of next-generation leaders in family firms (.64, p <.01). Not only was the influence positive and quite strong, but emotional and social intelligence explained about two-thirds of the variance in leadership effectiveness in the quantitative studies. This was not a surprise as emotional and social intelligence has been shown to be predictive of leadership effectiveness in many other contexts. However, the results of this study suggest that emotional and social intelligence is of supreme importance to nextgeneration leaders of family firms, as they must negotiate the complex and often emotionally-charged relationships with other family members in addition to the normal non-family relationships that exist in any organizational setting. One exceptional next-generation family leader who participated in the qualitative phase of the research demonstrated his ability to manage family relationships when he explained how he had worked with two sisters who were not involved in the management of the family firm to create ownership of company assets outside the operating company to provide for their financial well-being, and at the same time provide him with the control he needed to run the business. That same leader told stories about how he had learned the importance of adjusting his own leadership style to match the needs of the members of his management team, reflecting his development of self-awareness in addition to his relationship management skills. Another exceptional leader in a large family business with many family owners told a story about his work for the family council to negotiate shareholder agreements when he was leading an entrepreneurial venture he had founded that was completely unrelated to the family enterprise and the industry in which it operates. As a result of his skill at building relationships and 379

404 managing potential conflict among the family owners, the family recruited him to become the successor CEO of the family business. All three studies demonstrated the importance of the climate in the business owning families to the development of next-generation leader emotional and social intelligence (.25, p <.01). Three next-generation leaders of a very large family enterprise who participated in the qualitative phase of the research told stories about decades of constant conflict among family members that led to the departure of a fourth nextgeneration family member and the failure of one of their largest divisions. The stories they told about their own leadership experiences reflected emotional and social tone deafness that had exacted a heavy toll on their business results and psychological health. Their fathers, who were partners in establishing and growing the business, had modeled conflict throughout their careers. Family systems theory explains how patterns of behavior in a family tend to continue and often intensify from one generation to the next unless there is a conscious effort to change them (Kerr, 1988). One was left to wonder how this family business had survived given the culture of constant family conflict. The key survival factors appeared to be patents that protected the company s primary products and the leadership skills of a senior non-family executive who demonstrated a high level of emotional and social intelligence. The business survives, but the family members involved in its operation have paid a heavy personal toll. One of the studies most important contributions was providing insight into how next-generation leaders develop emotional and social intelligence skills in a family business context, which is discussed next. 380

405 Accepting and exercising personal responsibility is central to the development of next-generation family leader emotional and social intelligence. The quantitative studies demonstrated the strong effect of the degree to which next-generation family leaders take personal responsibility for their actions and decisions, as rated by their observers, on the expression of emotional and social intelligence competencies in their leadership behavior (.74, p<.01). This is particularly important in a family business context because the below-average leaders who participated in the qualitative study were so often shielded from the consequences of their actions, as well as the risk of failure, from which valuable leadership lessons can be learned. One next-generation leader who was interviewed for the qualitative study told a story about the failure of a division of his family enterprise while under his leadership. The most salient feature of his account was that he articulately explained the fundamental problem that resulted in division s demise, but never took any action to address it. In fact, he continually referred to it as their problem, as if it were in some way detached from his leadership responsibility. When the division collapsed, he was quickly moved to another division within the company, leaving others to deal with the aftermath. A senior non-family executive in the firm described how that next-generation leader s uncle had instructed him to create positions for next-generation family members as they entered the firm in which they cannot fail, a decision he regretted decades later. The nephew, well into mid-life when interviewed, demonstrated a remarkable lack of self-awareness, self-management, social awareness, and relationship management skills, the hallmarks of emotional and social intelligence. 381

406 Another young next-generation leader who participated in the qualitative study acknowledged that he had recently been promoted to a leadership position in the family firm for which he was not qualified. He recounted having flunked out of college three times because he did not take responsibly for his own education, reasoning that there were no consequences of failure, because my family has money, reflecting a meaningful deficit in self-management. His stories reflected his lack of relationship building skills as he told of conflicts with non-family leaders in the family firm and his lack of social awareness, demonstrated by developing drinking buddy relationships with rank and file employees. On the other hand, the exceptional leaders interviewed for the qualitative phase often recounted episodes that reflected their acceptance of responsibility, even for situations which were not of their making. One next-generation family member told of having to shut down an acquisition made by his father before he arrived on the scene after determining that the premise on which the acquisition had been made was not accurate and that there was no realistic chance of making it profitable. He suffered several anxiety attacks as he prepared to shut down the operation, but soldiered on without asking for assistance from the head office. The way in which he closed the division demonstrated his empathy for the employees who lost their jobs, as well as his ability to maintain positive relationships under such negative circumstances, an exceptional display of emotional and social intelligence. The implication of both the qualitative and quantitative phases of the study is that next-generation leaders learn emotional and social intelligence competences by squarely facing leadership challenges and by taking personal responsibility for overcoming them. 382

407 The literature is clear that emotional and social intelligence competencies can be learned, but that it takes a lot of practice (Boyatzis & McKee, 2005; Cherniss & Adler, 2000). While this is true in any organizational context, the study suggests that there is real danger in a family business that next-generation family members will be shielded from the very experiences that would help them achieve a sense of personal responsibility and develop emotional and social intelligence skills. It is difficult to imagine that the possibility of being protected from the consequences of one s decisions and actions would be as great in a non-family business context. It turned out that the nature of the climate in the business-owning family strongly influenced whether or not next-generation family leaders in the study assumed the personal responsibility that is so important to their development of emotional and social intelligence, a central finding discussed next. Family climate and challenging work experiences influence the degree to which next-generation family leaders accept and exercise personal responsibility. The qualitative and quantitative phases of the study suggested that the nature of the climate in the business-owning family and the degree to which next-generation leaders engaged in and valued challenging work experiences influenced their acceptance of personal responsibly, which in turn facilitated their expression of emotional and social intelligence competencies and leadership effectiveness. The quantitative studies showed that a positive family climate characterized by open communication, cognitive cohesion, and intergenerational attention positively influenced the display of emotional and social intelligence competencies by next-generation family leaders (.25, p <.01) through its effect on their acceptance of personal responsibility (.34, p <.01). 383

408 The qualitative phase demonstrated that a pattern of encouraging independence and personal responsibility in next-generation family members started early. When asked to recount life experiences that had made a lasting impact on their leadership behaviors, many of the exceptional leaders in the study began by describing a childhood experience. One leader told of how his parents had encouraged him to pursue his interest in motocross racing at age 11, when the social status of the family would have suggested more appropriate activities. That early experience prepared the next-generation family leader for his later formation of a NASCAR racing team. In assembling a team, attracting sponsors, and driving the car, he learned important organizational, financial, and team building skills that later served him well when he joined the family firm. By that time, his pattern of accepting personal responsibility was well established and the descriptions of his leadership behavior by others in his organization reflected his emotional and social intelligence competencies. His father assigned him responsibility for managing a small division when he decided to join the family business and allowed him to learn from successes and failures in that position. His level of reasonability continued to increase as he gained experience until he was eventually named CEO. After a period of very rapid growth and tremendous financial success under his leadership, he realized that the culture of the organization had changed in ways that were not consistent with the family s values. He looked to make changes in his own leadership behavior first in leading the company through a remarkable cultural transformation that resulted in a restoration of family values in management practices. That culture served the company, its leaders, and it employees well during a turndown in the industry during the financial crisis of the last decade. 384

409 On the other hand, the quantitative studies demonstrated the negative impact of a family climate characterized by a senior generation that exercises unquestioned authority and makes all the rules on the emotional and social intelligence competencies of the nextgeneration family leaders in their firms. There was a direct effect (-.23, p <.01), but it was fully mediated by intergenerational authority s negative effect on next-generation leader responsibility (-.29, p <.01). This finding suggests that the development of emotional and social intelligence competencies among next-generation family leaders is inhibited by senior-generation leaders in family firms who resist sharing responsibility with them. The research on emotional and social intelligence and intentional change suggests that such reticence to assign real responsibility to next-generation family members denies them the opportunity to succeed and fail as they practice leadership behaviors, a necessary step in learning emotional and social intelligence (Boyatzis, 2008; Boyatzis & McKee, 2005; Cherniss & Adler, 2000). Many of the below-average next-generation leaders who participated in the qualitative phase of the study told stories that reflected a lifetime of lack of real responsibility that confirmed and complemented the quantitative findings. One midcareer next-generation leader told of her work in the family business that extended back to her teenage years. She had performed a number of different jobs but had never really been allowed to practice leadership responsibilities by her capable but autocratic father who founded and grew the business. She had been constantly shifted from one department to another, never having an actual title that reflected her responsibilities. The stories she told about her interactions with others in the firm reflected a lack of emotional maturity that had exacted a heavy price in her personal life as well. As her father 385

410 approached retirement he had suddenly began to look to her for leadership, something for which she found herself completely unprepared. This women s story, and others like it that were related by other below-average next-generation leaders who participated in the study, suggest that the often hardcharging autocratic leadership styles of successful entrepreneurs (De Vries, 1977) who found or build a family business works against them when it comes time to pass the family business on to the next generation. Their failure to assign age and experienceappropriate responsibilities to next-generation family members denies them the opportunity to learn the emotional and social intelligence competencies that are so strongly predictive of leadership effectiveness. This may be one important reason so many family businesses fail to survive from one generation of family ownership to the next. The degree to which next-generation leaders engaged in and valued challenging work experiences was the other predictor of their acceptance of personal responsibility, as demonstrated in the second quantitative study (.19, p <.05). This finding was illuminated by the qualitative research that showed that the more effective leaders in the study actually sought out challenging opportunities to exercise responsibility and develop leadership skills. A young woman, who had experienced a successful athletic career while growing up and had gained valuable experience outside the family firm after graduating from college, was eager to take on a failing division of the family firm that had recently been acquired when she decided to join the family enterprise. She had no interest in joining without that kind of challenge. Her father fully embraced and 386

411 supported that view, recognizing how important it would be in training her for eventual top leadership responsibilities in their $6 billion family enterprise. A similar story was told by the CEO of a successful family enterprise that has expanded its franchise of regional newspapers, television and radio stations, and cable networks across the United States under his leadership. When he first joined the family enterprise as a young man, he sought out leadership of an underperforming shopping newspaper to test his ability to turn it around, a task he successfully achieved while learning a lot about himself and how to establish positive relationships with others in the organization. A related finding from the second quantitative study that was consistent with the results of the qualitative study was that mentoring (.39. p <.01) positively affected the degree to which the next-generation leaders in the study engaged in and valued challenging work experiences. While the literature is mixed on the effects of mentoring on the acquisition of leadership skills (Conger & Benjamin, 1999; Mccall et al., 1988), the study provided quantitative and qualitative evidence that in a family business, mentoring relationships provide next-generation leaders with the confidence and encouragement they need to tackle difficult job assignments. Nearly every exceptional next-generation leader in the qualitative study (88%) mentioned mentoring as important to their development as leaders, while it was rarely mentioned by below average nextgeneration leaders in the study (14%). The literature suggests that family firms rely more on relationship-based training like mentoring than non-family firms (Fiegener et al., 1994). Perhaps next-generation family leaders are more likely than leaders in non-family 387

412 businesses to develop long-term relationships with senior leaders because they don t change jobs as often, and because those senior leaders are often family members. The other major goal of the study was to identify and explore factors that influence the degree to which next-generation leaders in family businesses derive energy, inspiration, and a sense of personal fulfillment from their work in the family firm. Integrated findings that shed light on predictors of next-generation leader positive engagement with work are discussed next. Next-generation family leader self-assessment drives their work engagement, but the effect is attenuated by lack of self-awareness. Accurate self-awareness is predicted by open communication in the family. The results of the second quantitative study demonstrated that next-generation leader self-assessment of leadership behaviors reflective of emotional and social intelligence competencies was the strongest driver of their positive engagement with work in the family firm (.48, p <.01). This was not surprising as the literature suggests that self-perceptions of leadership behaviors reflect self-efficacy (Bandura, 1982), which has been shown to be positively related to engagement with work (Maslach et al., 2001; Schaufeli & Salanova, 2007). However, the results of this phase of the study also showed that next-generation leader lack of selfawareness negatively affected their engagement with work (-.21, p <.05), thus attenuating the effect of their self-assessments of leadership behaviors. In other words, the degree to which next-generation leader derive positive psychological benefits from their work in the family firm is related to their self-awareness, a key component of emotional and social intelligence (Boyatzis & McKee, 2005; Goleman et al., 2002). 388

413 Results of the qualitative phase of the study reinforced this finding and provided insight into why accurate self-awareness affects the degree which next-generation leaders engage with their work in the family firm. All of the exceptional next-generation leaders who were interviewed in the qualitative phase of the study, save one, reflected on their decisions to join the family firm and talked about lessons learned from their successes and failures as developing leaders. None of the stories told by the below-average nextgeneration leaders indicated that they engaged in much self-reflection. What was somewhat remarkable was that most of the exceptional leaders said they never thought they would join the family business while they were growing up. It was only after a period of deep reflection, and often experiences outside the family firm, that they came to realize a career in the family business matched their personal values and represented a way for them to express their unique talents and achieve career and life goals. One exceptional next-generation leader told of taking a three-month trip after working outside the family firm for several years to reflect on an opportunity to join the family business. Another exceptional leader who was recruited to become the CEO of his family s business after playing a key role in a successful start-up in a completely unrelated industry, said deep reflection help him realize he could make a greater difference in the world by leading his family firm than he could by continuing his career in the non-family business he helped found. Intentional change theory suggests that these leaders discovered opportunities for the expression of their ideal selves through leadership roles in their family firms (Boyatzis, 2006, 2008), leading naturally to a sense of personal fulfillment and high levels of engagement with their work. 389

414 Lessons learned from the leadership development stories related by the exceptional leaders in the qualitative phase also closely matched what other family members and non-family leaders in their firms had to say about their leadership ability. On the other hand, stories told by the below-average leaders were often viewed quite differently by others with whom they worked. One below-average next-generation leader who was quite confident in his leadership ability was unable to acknowledge a serious gap in his leadership that had contributed to the bankruptcy of one of the family enterprise s businesses. His brother, cousins, and a key non-family executive, however, were quite consistent in identifying his leadership blind spots and their effects. While he had certainly been engaged with his work in the family business at one point in time, his interview revealed a high level of frustration and personal pain, likely influenced by his lack of self-awareness, that robbed him of the opportunity to derive the psychological rewards of full and positive engagement with his work. His was a difficult story to hear. It was as if his expression of supreme confidence reflected insecurities related to his need to live up to the leadership successes of his uncle who had built the business. More open communication in his family might have helped him avoid the pain as the second quantitative study showed that open communication in the business-owning family positively affects next-generation leader self-awareness (.25, p <.05) and is directly related to their expression of emotional and social intelligence competencies (.21, p <.05). Other family members certainly understood his opportunities for improvement, but it was clear that they had failed to communicate them to him in a way that might have helped. This is a serious risk for next-generation leaders in family-owned firms as family members are often reticent about clearly communicating their need to improve leadership 390

415 behaviors (Poza, 2013), perhaps because they fear that being honest may damage family relationships or because they mistakenly believe that protecting developing nextgeneration family leaders is in their best interest. Sadly, the quantitative and qualitative study results suggest that lack of such frank communication not only decreases the chances that next-generation family leaders will develop leadership skills that will benefit the business, but it decreases the likelihood that they will discover personally energizing and rewarding careers in the family firm. How others in the family firm interact with next-generation leaders affects their engagement with work in another important way discussed next. The degree to which next-generation family leaders are held accountable by others influences their engagement with work and is predicted by family climate. In what may seem paradoxical to some, the quantitative studies demonstrated that being held accountable by others in the family firms was the other meaningful predictor of the degree to which the next-generation leaders in the study were positively engaged with their work (.26, p <.01). Next-generation self-assessment of leadership behaviors and being held accountable taken together explained 43% of the variance in work engagement in the structural equation model developed in the third phase of the study. Interviews with the below-average leaders in the qualitative study helped to explain this finding. One leader explained that in her family firm there would always be positions available for family members, regardless of performance. Another described an encounter with his non-family immediate supervisor that was a pretty egregious example of insubordination that would likely not have been tolerated from a non-family employee. Instead of being fired, he was later promoted to a position in another area of the firm, a 391

416 position for which he acknowledged he was not qualified. Yet another told of his transfer to a top leadership position in another division of the family enterprise when the business he was leading failed. In these examples and others like them, below-average nextgeneration leaders explained in great detail the stress, strain, and burden of working for their family firms. The tone of their stories was in sharp contrast to the energy and enthusiasm reflected in the stories told by their exceptional counterparts in other family firms, an indication of positive engagement with work. The quantitative studies further demonstrated the importance of family climate. A family climate characterized by open communication, intergenerational attention, and cognitive cohesion positively affected the degree to which next-generation leaders were held accountable (.24, p <.01) and engaged with their work. On the other hand, a family climate characterized by an autocratic senior generation negatively affected nextgeneration leader accountability (-.24, p <.01) and work engagement. However, these direct effects were fully mediated by next-generation leader acceptance of personal responsibility, which had a very strong effect on the degree to which they were held accountable by others (.63, p <.01). The results suggests that others take their cues about holding next-generation family leaders accountable from the leaders themselves as they are more likely to hold those who demonstrate personal responsibility accountable than those who do not. The quantitative study conducted in the third phase of the study amplified the findings on next-generation leader engagement with work discovered in the qualitative and first quantitative studies by demonstrating the positive effects of challenging work experiences on next-generation leader self-assessment of leadership behaviors (.28, p < 392

417 .01) and accountability (.25, p <.01), the major drivers of their work engagement (R² =.43). As has already been discussed, the exceptional leaders in the qualitative phase of the study sought out challenging experiences and the below-average leaders were often protected from them. So it turned out that next-generation leaders in family firms have a great deal of control over the degree to which they derive the positive benefits of being engaged with their work in the family firm through their acceptance of personal responsibility and their pursuit of challenging work experiences. The chances that they will actually exercise that control is influenced by the nature of the climate in their families. Family climate also had meaningful effects on the motivations of next-generation leaders for working in the family firm, to which the discussion now turns. Family climate influences next-generation family leader motivations for working in the family business. The nature of those motivations affects their leadership effectiveness, work engagement, and the organizational climate of the family business. The effects of next-generation leader motivation for working in the family business seemed simple enough at the conclusion of the first qualitative phase of the study. The exceptional leaders most often talked about ways in which providing leadership for their family firms provided personal meaning and fulfillment through opportunities to express personal values and achieve career and life goals. As discussed earlier, their decisions to join the family business often came after periods of deep personal reflection. For them, working in the family business was a way to operationalize intentional change theory s ideal self (Boyatzis, 2008; Boyatzis & Akrivou, 2006). On the other hand, the below-average leaders in the qualitative phase 393

418 most often talked about working for the family business because they felt entitled or obligated in some way. One below-average leader talked with great enthusiasm about an earlier interest in a career totally unrelated to the industry in which his family business operates. His tone of voice took on a more melancholy tone as he talked about giving up that dream because he felt obligated to help his father continue the family business. It was another of those stories that was hard to hear and reflected the next-generation leader s decision to surrender to intentional change theory s ought self (Boyatzis, 2008; Boyatzis & Akrivou, 2006). Another below-average leader reflected his sense of entitlement when he readily acknowledged that he was unqualified for his leadership position in the family firm, which had been made possible by his mother s ownership position. The conclusion at the end of the qualitative phase was that next-generation leaders whose leadership positions in the family firm were expressions of their ideal selves were more likely to be effective leaders who were highly engaged with their work than those whose leadership positions were more a reflection of their ought or entitled selves. The quantitative studies, however, presented a more nuanced view of the effects of next-generation family leader motivations for working in the family business. Scales developed to measure self-determination theory s autonomous and controlled motivations (Gagné & Deci, 2005; Gagné et al., 2010) were used in the studies. Autonomous motivation is quite similar to intentional change theory s ideal self, and controlled motivation is quite similar to intentional change theory s ought self. Autonomous motivation was predictive of leadership effectiveness (.14, p <.05), but its effect was not as strong as had been expected based on the qualitative results. 394

419 Autonomous motivation had no effect on next-generation engagement with work, also a surprising result. A family climate characterized by open communication, intergenerational attention, and cognitive cohesion had a strong positive effect on autonomous motivation (.34. p <.01), suggesting that a positive and supportive family climate is important to a next-generation family member s exploration and discovery of his or her ideal self. However, the quantitative results suggest that pursuing a career in the family firm because it presents opportunities for expressing one s ideal self is not sufficient to ensure leadership effectiveness or engagement with work. As discussed above, assuming personal responsibility is also necessary, as it is more strongly predictive of leadership effectiveness through its influence on the development of emotional and social intelligence competencies, and of work engagement through its effect on next-generation leader accountability. The good news in the study results is that the same positive family climate that increases the chances next-generation family members will choose a career in the family firm because it provides a vehicle for pursuing their ideal selves also positively affects their acceptance of personal responsibility. Two forms of self-determination theory s controlled motivation were measured in the quantitative studies, with results that were illuminating but not what had been expected based on the results of the qualitative phase and theory. In the first quantitative study, external motivation, a form of extrinsic controlled motivation that reflects coercion by external contingencies, (Gagné & Deci, 2005), had an unexpected negative effect on the organizational climate of the family business itself (-.18, p <.05). It was through this effect that external motivation negatively influenced next-generation leader engagement 395

420 with work, but its indirect effect was quite weak (-.05, p <.10). Contrary to expectations, it had no effect on next generation leadership effectiveness. External motivation in this study reflected a next-generation leader s decision to work in the family firm because it was expected of them and to avoid criticism from family members, a strong expression of intentional change theory s ought self. Consequently, it was not surprising to find that a family climate characterized by a senior generation that exercises unquestioned authority strongly predicted next-generation leader external motivation for working in the family business (.38, p <.01). In interpreting this result, it was helpful to return to the finding that showed that an autocratic senior generation in the family negatively affected next-generation leader demonstration of personal responsibility (-.29, p <.01). Taken together, these two results suggest that next-generation leaders who are motivated to work in the family business to avoid the criticism of family members, but who are discouraged or prevented from assuming real responsibility, are likely to experience frustration in their attempts to earn respect and avoid the criticism they fear. The results further suggest that such frustration may well affect the organizational climate in the family business itself, as it plays out in the behaviors of the senior and junior family leaders. Over time, such frustration may result in next-generation leader amotivation, the lack of intention and motivation (Gagné & Deci, 2005), as they essentially give up. This possibility was not explored in the present study, but it would make for an interesting line of further inquiry. A somewhat surprising result of the study s exploration of next-generation leader motivation for working in the family business was that introjected regulation, a form of external motivation that has been partially internalized (Gagné & Deci, 2005), had 396

421 positive effects on family business climate in the first quantitative study (.28, p <.01), and on the degree to which next-generation leaders engaged in and valued challenging work experiences in the second quantitative study (.20, p <.05). Through those effects, it had positive indirect effects on next-generation leader effectiveness (.07, p <.05) and work engagement (.08. p <.01). These results were surprising because selfdetermination theory suggests that the effects of introjected regulation are likely to be negative rather than positive (Gagné & Deci, 2005). Introjected regulation in this study reflected a next-generation leader s desire to be a successful successor in the family firm, their pride in working for the family business, and a fear of failure because the business is such an important part of their life. The stewardship theory of family business helps to explain this unexpected result. This theory postulates that family members often view the family firm as extensions of themselves and thus closely related to their own well-being (Poza, 2013). This suggests that extrinsic factors reflective of introjected regulation may be more internalized by next-generation leaders in a family business context than might be the case in a nonfamily business environment, thus making a leadership position in the family firm more aligned with the ideal self than the ought self. While family climate had no effect on introjected regulation, mentoring, which in this study included family mentors, positively affected that form of motivation (.22, p <.05). This suggests that family mentors may help next-generation leaders identify with the family business and develop the confidence they need to take on challenging work experiences that develop leadership skills and result in positive work engagement. 397

422 While the quantitative phases of the study demonstrated that next-generation leader motivation for working in the family firm was not as strongly predictive of their leadership effectiveness and work engagement as theory and the results of the qualitative study suggested, it was still important, and like so many other factors in the study, it was influenced by the nature of the climate in the business-owning family. What was not expected was its impact on the organizational climate in the family business itself (R² =.17). The results imply that others working in the family business sense next-generation leader motivation and that it affects how everyone approaches their work. A nextgeneration leader who is externally motivated by the desire to meet the expectations of family members and avoid their criticism casts a shadow over the entire organization. On the other hand, a next-generation leader who has internalized the desire to become a successful successor and personally identifies with the business is more likely to take on challenging work experiences and positively influence the cultural tone of the family firm. 398

423 CHAPTER VI: CONCLUSION Contributions to Theory The study contributes to family business and leadership theory in four important ways. First, it identifies the mechanisms through which the climate of the businessowning family affects the development of next-generation family business leader emotional and social intelligence competencies, which in turn predict their leadership effectiveness and engagement with work in the family firm. Second, it demonstrates how family climate influences the intentional change process through which next-generation leaders learn leadership skills. Third, it suggests that one reason for the low survival rate of family firms from one generation of family ownership to the next may well be related to a family climate in which senior generation family members exercise unquestioned authority, thus impeding the development of next-generation leadership talent. Finally, it suggests that next-generation family business leaders have a great deal of control over their own destiny. Family climate and the expression of emotional and social intelligence. The nature of relationships in the nuclear family in which leaders grow up influences their leadership behaviors. The literature leadership is fairly clear on that point. What is different for next-generation family business leaders, though, is that the influence of family climate extends well beyond their early formative years, often exerting powerful effects throughout their careers. In many multi-generational family firms, family influence extends beyond the nuclear family to include aunts, uncles, and cousins. Leaders in non-family businesses rarely have to consider the views of family members when they make business decisions. Next-generation leaders of family enterprises, on the 399

424 other hand, must consider the goals, needs, personalities, and opinions of family members in almost every important decision they make. This study began with the idea that family climate might play an important role in the degree to which next-generation family business leaders develop leadership skills and become positively engaged with their work in the family firm. The study adds to family business and leadership theory by confirming that premise and by identifying mechanisms through which that influence is operationalized. The study demonstrated that a family climate characterized by open and transparent communication, senior generation attention to the developmental needs of the next generation, and similar values and ways of seeing the world positively influences the degree to which next-generation family leaders assume personal responsibility for their actions and decisions, which in turn strongly affects their display of emotional and social intelligence competencies and leadership effectiveness. Interestingly, their acceptance of personal responsibility also has a strong effect on the degree to which others hold them accountable, which in turn influences their positive engagement with work in the family business. On the other hand, the study showed that an autocratic senior generation that exercises unquestioned authority and makes all the rules negatively affects nextgeneration leader acceptance of personal responsibly, thus impeding their development of emotional and social intelligence competencies, leadership effectiveness, accountability, and engagement with work. This is extremely important as both the literature and the qualitative phase of the study suggest that next-generation family leaders are often shielded from the consequences of their actions and decisions and denied opportunities to learn through challenging work assignments that by their very nature entail risk of failure. 400

425 Whether well-intentioned or not, the study s findings demonstrate that such protection from responsibility puts at risk the development of leadership skills next-generation leaders need to become effective leaders of the family enterprise. The mechanisms through which family climate and challenging work experiences influence next-generation leadership development and work engagement are depicted in Figure 26. Family climate and challenging work experiences are at the heart of nextgeneration leader development. They influence the degree to which next-generation leaders assume personal responsibility, shown in the next ring of the model. Assuming personal responsibility helps next-generation leaders learn emotion and social intelligence competencies and signals to others that they are open to being held accountable. Next-generation leader display of emotional and social intelligence, as observed by others, predicts their leadership effectiveness, shown in the outermost ring of the model. The degree to which they are held accountable by others and their selfassessment of emotional and social intelligence impact the degree to which they are positively engaged with their work, also depicted in the outermost ring. 401

426 Figure 26. Next-Generation Family Business Leader Development Model Family relationships and the process of intentional change. The study makes another contribution to theory in demonstrating that family climate influences every step of the intentional change process that is so critical to the acquisition of leadership skills. Results showed that a positive family climate increases the likelihood that nextgeneration family members will decide to work in the family firm because it represents an opportunity to express their personal values and achieve life and career goals, thus helping them define intentional change theory s ideal self, which in turn positively affects their leadership effectiveness. The study also showed that open communication in the family positively influences next-generation family leader self-awareness, thus 402

427 helping them accurately perceive intentional change theory s real self. Mentoring by other family members influences the degree to which next-generation leaders are motivated by a desire to be successful successors in the family business (introjected regulation), which encourages the development of a learning agenda that includes challenging work assignments. And finally, that same mentoring provides nextgeneration leaders the support they need to feel safe in practicing leadership through challenging work experiences. These effects on the intentional change process are depicted in Figure 27. Once again, family relationships are at the heart of the model. Figure 27. Next-Generation Family Business Leader Intentional Change Model 403

428 Family climate and the future of the family enterprise. The study makes an important contribution to family business theory by providing evidence that the hardcharging autocratic leadership of many entrepreneurs who found or grow family firms is likely to work against them when it comes to preparing the next-generation for leadership responsibilities. Weak next-generation leadership is often cited as one of the top reasons family businesses fail to successfully pass from one generation of family ownership to the next, and the study demonstrates that an autocratic senior generation impedes the development of next-generation leadership skills. Senior generation leaders who are unwilling to allow next-generation family members opportunities to learn from successes and failures through job assignments with real responsibility and accountability put the future of the family enterprise at risk. Next-generation leader control of own destiny. Finally, the study contributes to theory by demonstrating that next-generation family leaders have a great deal of control over their own destiny as leaders who serve the family business effectively and derive personal fulfillment from their work in the family firm at the same time. While they can t change their families or control how other family members interact with them, they can decide to assume the personal responsibility that has such a strong effect on their development of leadership skills and positive engagement with work. Implications for Practice Building and sustaining a family business is hard work. Overcoming the obstacles of successfully founding a business, keeping up with changes in the marketplace, taking care of employees and customers, raising capital, and developing taxefficient ownership structures require careful planning, skillful execution, and a lot of 404

429 energy. As important as those tasks are, when it comes to preparing next-generation family members for leadership and ownership responsibilities, this study presents empirical evidence that what happens in the family is just as important. Following are some key actions senior and next-generation leaders of family firms can take to address the factors identified in the research as important to next-generation leader development. Balance a focus on the business with a focus on the family. The study is clear that a positive family climate characterized by open and transparent communication makes it more likely that next-generation leaders will develop the emotional and social intelligence skills that predict leadership effectiveness and provide them with the support they need to practice leadership skills. One important way to facilitate healthy communication in the family is by holding regularly scheduled and well-planned family meetings. Family meetings can be used to help family members work together to create a common vision for the future of the family enterprise, develop ownership goals, create family policies, and provide education on a wide range of topics including communication and leadership skills. The study also provides evidence that businessowning families who communicate effectively help next-generation leaders develop accurate self-awareness, which is critical to the process of learning leadership skills. Not only do well-conducted family meetings facilitate communication, but they provide an opportunity for skilled family leaders to model emotional and social intelligence competencies for next-generation family members. Provide next-generation family leaders with challenging work assignments. In addition to family climate, engaging in and valuing challenging work assignments was the other factor in the study that predicted the likelihood that next-generation leaders 405

430 would assume the personal responsibility that leads to leadership effectiveness and work engagement. This is a particularly important point as next-generation family leaders are often shielded from real responsibility and accountability in the family firm. Family business consultants often recommend that next-generation family members get experience outside the family business to increase the chances they will receive objective feedback on their performance and develop self-confidence. The results of this study suggest that it is the nature of the work experience rather than where it takes place that is the more important factor. The study also suggests that starting early with ageappropriate responsibilities can have positive lifetime effects. The availability of simple chores that can be performed by young next-generation family members to teach them responsibility and expose them to the challenges and rewards of running a family business represents a tremendous advantage for the children of family business owners. Early experiences with some kind of challenge, whether in the family business or in the pursuit of some personal interest, were most often the first thing mentioned by the exceptional leaders in the qualitative phase of the study when asked about experiences that had the most impact on their development as leaders. Conduct periodic 360-degree evaluations of all family leaders on a periodic basis. Like so many other studies on leader evaluations, this study confirmed that observer ratings of leader behaviors are significantly more predictive of leadership effectiveness than self-assessments. Senior and next-generation leaders are advised to seek out feedback from employees, peers, and immediate supervisors on a regular basis to stay aware of how others perceive them and to measure their progress in improving leadership effectiveness. Leaders of family firms who are also members of the business- 406

431 owning family often do not receive accurate feedback on their leadership behaviors. Not only does this impede the development of next-generation leaders, but the study suggests that it can be a major problem for members of the senior generation as well. If senior generation family members lead the family autocratically, a leadership style common among entrepreneurs who found or build a family business, the study provides clear evidence that such controlling behavior negatively influences the development of the next-generation, putting the future of the business at risk. Senior and next-generation leaders of family firms may never really know how others perceive their leadership behaviors unless they ask. Not knowing how others perceive one s leadership behaviors is much like being unaware of trends in the marketplace. Without accurate information, efforts to be more effective can be like shooting in the dark. Next-generation family business leaders should seek out mentoring relationships. The study showed that mentoring relationships positively affect nextgeneration leader motivation to succeed in the family business and to engage in challenging work assignments that help them learn leadership skills and positively engage with their work. Mentoring represents another meaningful advantage to nextgeneration family business leaders when compared to their counterparts in non-family firms. Other studies have shown that next-generation leaders in non-family businesses often do not stay in one position or division long enough to form mentoring relationships. Next-generation leaders of family firms, on the other hand, are more likely to have longer tenures with the family firm and more opportunities to develop mentoring relationships with family or non-family leaders inside or outside the family business. The exceptional 407

432 leaders in the qualitative phase of the study were almost universal in citing mentoring relationships as important to their development as leaders. Next-generation family leaders would be wise to develop life plans. The study demonstrates that next-generation motivation for working in the family business influences their leadership effectiveness, desire to succeed, likelihood of taking on challenging work assignments, engagement with work, and even the organizational climate of the family business itself. Creating a life plan helps next-generation family member reflect deeply on their life and career goals and whether or not working in the family enterprise is likely to help them achieve those goals. It also gives them an opportunity to evaluate the nature of the culture in their family. A family that communicates openly and effectively will likely support their development. One in which the senor generation exercises unquestioned authority will likely impede it, in which case they may be better off to build a career outside the family enterprise. Creating a life plan and keeping it up to date also helps next-generation leaders map out a plan to take personal responsibility for their own development and monitor their progress. Limitations The sample of 37 family business leaders from 11 privately held firms for the extreme case comparison in the qualitative phase of the study was small and nonrandomly selected, thus representing a limitation common to this type of research. Firms selected for the study were subjectively assessed as having exceptional or below-average leadership talent by those who nominated them, although this limitation was addressed by securing multiple nominations for each firm and choosing acknowledged experts in the field of family business to make the nominations. The qualitative study also relied on 408

433 participant recollections of events that occurred over the span of many years, which introduced the possibility of fading memories or biased interpretation of lived experiences. However, Shamir and Eilam (2005) assert that authentic leadership rests heavily on the meanings derived from the construction of one s life story, thus providing confidence in the reliability of the qualitative findings. Next-generation leaders represented in the quantitative phase of the study were self-selected since they voluntarily responded to invitations to participate, thus they did not comprise a strictly random sample. This introduces the threat of external validity, the ability to generalize results across all family businesses (Shadish et al., 2002), so the results should be viewed with the possibility of that limitation in mind. Next-generation leaders also nominated their own multi-raters introducing the possibility of social desirability in multi-rater responses, a potential threat to construct validity, the ability to generalize causes and effects (Shadish et al., 2002), although this is a risk inherent to most 360-degree leadership surveys. Nonetheless, there was sufficient variation in multirater evaluations to provide confidence in the reliability of the results. As with most studies of this nature, the constructs used in the structural equation models for the quantitative phases were measured at a specific point in time. Concepts like leadership effectiveness and engagement with work develop over time, so theoretically a longitudinal study would be ideal. However, there is enough variation in the age of the next-generation leaders who participated and in the generational stage of ownership of their family firms to provide confidence in the reliability of the findings. Finally, although the total sample size for the quantitative studies was 450, only 100 next-generation leaders were represented, which made it difficult to fully explore the 409

434 effects of controls. Age of next-generation leaders did have some effect on leadership effectiveness suggesting that leadership skills are learned over time. However, only 19 of the next-generation leaders in the final matched sample were female, making evaluation of possible gender differences unreliable. Previous research (Overbeke, 2010) and the results of the qualitative phase suggest that female next-generation leaders are sometimes treated differently in the family business than their male counterparts, so that was a line of inquiry that was not satisfied. Future Research A study designed to compare factors influencing the development of nextgeneration leaders in family firms and non-family businesses would make a meaningful contribution to the leadership and family business literature. Because there is evidence that next-generation family leaders receive less accurate evaluations of their performance, such a study could explore differences in the amount and perceived quality of feedback on leadership behaviors received by next-generation leaders in both contexts to ascertain its effect on their self-awareness and display of the emotional and social intelligence competencies that so strongly predict leadership effectiveness. It would also be illuminating to explore the impact of the climate in the nuclear families in which nextgeneration leaders grow up to see if its impact on leaders in non-family firms is as strong as it was for the next-generation leaders in this study. A strength of the current study is that family climate was measured using data from multiple family members involved in the family business. It might be more difficult to get multiple perspectives on the nuclear families for leaders in non-family businesses, but just comparing self-report data might produce meaningful results. 410

435 Because family climate emerged as such a central factor in the study, further research to explore how business-owning families develop the open communication, intergenerational attention, and cognitive cohesion that is reflective of a positive family climate would be useful. A study to explore the effects of family climate beyond its effect on next-generation leader development, including its effects on family business performance and longevity, would also make an important contribution to our understanding of family business dynamics. There is an opportunity to further develop and validate a new scale of family business leader accountability. Three of five items created for this study to measure nextgeneration leader accountability formed a separate construct, distinct from an established responsibility scale that was used in the quantitative studies. These three items measured the extent to which next-generation leaders held positions with genuine responsibility and accountability in the family firm, were held accountable by others, and were shielded from the consequences of their actions and decisions (a reverse-coded item). That new accountability construct had different effects than the responsibility construct, further demonstrating its reflection of a distinctive concept. A study with a larger sample size and additional items designed to more fully capture the concept and validate a new scale would make an important contribution to family business research. Finally, the results of the qualitative study suggest that research to examine the role of non-family leaders in family businesses would be illuminating. The non-family leaders in the family firms with both exceptional and below-average next-generation family leaders shared leadership characteristics associated with exceptional leadership talent, suggesting that business-owning families recognize and value the contributions of 411

436 talented non-family leaders. Perhaps family firms with below-average next-generation family leaders compensate by hiring and developing capable non-family leaders. Exploring non-family leader motivations for working in a family firm when they likely have many other options, as well as factors that influence their success or failure in providing leadership for a business in which they have no ownership or control would also make a valuable contribution to family business theory and practice. Closing Thoughts The final word is that the task of preparing next-generation family members for leadership responsibilities in the family business is too important to leave to chance. The stakes are high for the business, owners, employees, customers, communities served by the family enterprise, and perhaps most of all, for the next generation leaders themselves. It is hoped this research will serve as a clarion call for business-owning families to provide next-generation family members with opportunities to learn leadership skills through age and experience-appropriate work assignments with genuine responsibility and accountability - and for next-generation leaders to seek out such experiences whether or not they are offered. They are also encouraged to work just as hard to create a family climate characterized by open communication, attention to the developmental needs of the next generation, and shared values as they do to building a successful business The study provides empirical evidence that next-generation leaders who are provided with challenging work assignments, a positive and supportive family climate, meaningful mentoring relationships, and opportunities to receive honest feedback on their leadership behaviors are more likely to become self-aware, effective leaders who derive positive energy, inspiration, and fulfillment form their work in the family firm leaders who are 412

437 capable of overcoming the odds against family business survival through multiple generations of family ownership. 413

438 Appendix A. Emotional and Social Intelligence Leadership Competencies Self-Awareness Self-Management Social Awareness Relationship Management Emotional self-awareness Self-control Empathy Inspiration Accurate self- assessment Transparency Organizational awareness Influence Self-confidence Adaptability Service Developing others Achievement Change catalyst Initiative Conflict management Optimism Teamwork and collaboration Source: Goleman, D., Boyatzis, R. E., & McKee, A. (2002). Primal leadership: Realizing the power of emotional intelligence: Harvard Business Press. 414

439 Appendix B. Interview Protocol 1. Thinking back over your life, what are some of the key events that shaped your development as a leader? What happened? When did it happen? Who was involved? What did you do? What did you learn from each event? Did you change your practice of leadership in some way as a result of each of those events? 2. Who are some of the people who have had the most influence on your development as a leader? Who are they? What is the nature of your relationship with each person? How have they influenced you? How would you describe their leadership styles? Their strengths? Their weaknesses? 3. What kind of formal education and training have you had? Academic? Leadership training programs? Other formal training? Did you make any changes in your practice of leadership as a result? 4. How would you describe the culture of this family business? 5. How would you describe relationships among: Family business leaders? Family owners? Family members and non-family leaders of the business? 6. How would you describe your own leadership style? Has it changed over the years, and if so how? If it has changed, what happened that caused you to change how you lead? 415

440 Appendix C. Interrater Agreement on Presence of Themes No. Theme Interrater Agreement on Presence 1 Early Leadership Learning Experiences 80% 2 Job Assignments with Real Responsibility and Accountability 83% 3 Mission/Vision Motivations for Joining the Family Business 92% 4 Demonstrating High Emotional and Social Intelligence 100% 5 Leaning from Mentors, Bosses, Advisors 100% 6 Receiving Formal Business/Leadership Training 89% 7 Engaging in Personal Reflection 100% 8 Multiple Levels of Supportive Family Relationships 89% 9 Taking Responsibility for Own Actions 92% 10 Being Shielded from Risk and/or Consequences of Failure 80% 11 Obligatory or Entitled Motivations for Joining the Family Business 80% 12 Demonstrating Low Emotional and Social Intelligence 86% 13 Having No Mentors 0% 14 Lacking Formal Business/Leadership Training 91% 15 Family Business Environment Characterized by Unresolved Conflict 86% 16 Being Promoted to Leadership Positions for Which Not Qualified 86% 17 Living in Shadow of Father or Other Key Family Business Leader 40% 18 Doing Rather than Leading 86% 19 Learning Late But Beginning to Learn 50% 416

441 Appendix D. Presence of Themes in All 37 Interviews All Leaders SGF Leaders NGF Leaders NFL Leaders EXLT BAL EXLT BALT EXLT BALT EXLT BAL Theme (n=20) (n=17 (n=4) (n=4) (n=8) (n=7) (n=8) (n=6) 1. Early Leadership Learning 70% 24% 75% 0% 75% 0% 63% 67% 2. Job Assignments with Real Responsibility and 95% 53% 75% 50% 100% 14% 100% 100% 3. C Mission/Vision Motivations for Joining the Family Business 80% 35% 100% 50% 88% 14% 63% 50% 4. Demonstrating Emotional and Social Intelligence 95% 35% 100% 25% 88% 0% 100% 83% 5. Learning from Mentors and 95% 59% 100% 75% 88% 14% 100% 100% 6. Receiving Formal 70% 65% 75% 50% 88% 57% 50% 83% Business/Leadership Training 7. Engaging in Personal 80% 35% 75% 25% 88% 0% 75% 83% 8. Experiencing Multiple Levels of Supportive Family 60% 24% 75% 25% 100% 0% 13% 50% 9. RTaking l i Responsibility hi for Own 100% 59% 100% 75% 100% 14% 100% 100% 10. Being Shielded from Risk and/or Consequences of 0% 35% 0% 0% 0% 86% 0% 0% 11. Obligatory il or Entitled Motivations for Joining the Family Business 5% 47% 0% 25% 13% 86% 0% 17% 12. Family Business Environment Characterized by Unresolved 0% 82% 0% 75% 0% 86% 0% 83% 13. CBeing fli Promoted to Leadership Positions for Which Not 0% 35% 0% 0% 0% 86% 0% 0% 14. QDoing lifirather d than Leading 5% 59% 0% 50% 13% 86% 0% 33% Code: EXLT = Exceptional Leadership Talent Firms BALT = Below-Average Leadership Talent Firms SGF = Senior Generation Family NGF = Next-Generation Family NFL = Non-Family Leader 417

442 Appendix E. Construct Definitions and Measurement Scales Construct Definition Scale/Items Source Family Climate The nature of family relationships and whole-family functioning. Emotional and Social Intelligence Competencies Motivation for Working in the Family Business The extent to which the leader exhibits selfawareness, selfmanagement, social awareness, and relationship management skills. The nextgeneration leader s reasons for working in the family firm. The Family Climate Scales. 32 items that measure four dimensions of family climate: (1) Open Communication; (2) Intergenerational Authority; (3) Intergenerational Attention; and (4) Cognitive Cohesion. Emotional and Social Competency Inventory University Edition (ESCI-U). 44 items that measure 9 dimensions of emotional and social intelligence: (1) Achievement Orientation; (2) Adaptability; (3) Coach and Mentor; (4) Empathy; (5) Inspirational Leadership; (6) Organizational Awareness; (7) Pattern Recognition; (8) Systems Thinking; (9) Teamwork 11 items from the Motivation to Work in the Family Business Scale and 9 items from the Multidimensional Work Motivation Scale that measure four dimensions of motivation: Björnberg, A. & Nicholson, N. (2007). The family climate scales: Development of a new measure for use in family business research. Family Business Review, 20(3): Boyatzis, R.E. & Goleman, D. ESCI-U. Hay Group, Boston, MA. Gagne, M. Motivation to Work in the Family Business Scale. Unpublished. Gagne, M. et al. (2013). Motivation at work across 418

443 Responsibility and Accountability Family Business Climate Leadership Effectiveness The degree to which the leader accepts responsibility and is held accountable for his/her actions and decisions. The nature of relationships among all members (family and non-family) of the family business. The culture of the family business. A general overall assessment of a person as a managerial leader. (1) External regulation; (2) Identified regulation; (3) Intrinsic motivation; (4) Introjected regulation The Responsibility Scale. 10 items developed by Wood & Winston. Adapted by adding 5 items based on findings from our qualitative study. Positive and Negative Emotional Attractor (PENA) Survey. 20 items that measure three dimensions of organizational climate: (1) Vision; (2) Compassion; (3) Overall positive mood. 5 items that measure leadership performance standards, comparison with leadership peers, performance as a role model, overall leadership success, and overall effectiveness as a leader. (Adapted by substituting leader for manager in the original scale. cultures. Unpublished. Wood, J.A. & Winston, B.E. (2007). Development of three scales to measure leader accountability. Leadership & Organizational Development Journal, 28(2): Boyatzis, R.E. & Oliver W. (2008). PNEA Survey. Denison, D.R. et al. (1995). Paradox and performance: Toward a theory of behavioral complexity in managerial leadership. Organization Science, 6(5):

444 Work Engagement A positive, fulfilling workrelated state of mind. The positive opposite of burnout. Utrecht Work Engagement Scale (9- item version). 9 items that measure three dimension of work engagement: (1) Vigor; (2) Dedication; (3) Absorption Seppälä, P. et al. (2009). The construct validity of the Utrecht work engagement scale: Multisample and longitudinal evidence. Journal of Happiness Studies, 10,

445 Appendix F. Survey Items Item Code Respondent Category 1 Next-generation family member leader filling out this survey about my own leadership experiences 2 Next-generation family member leader filling out this survey about another next-generation leader's experiences 3 Founder or other first-generation (G1) family member leader in a familyowned or controlled business 4 Family member working in my family s business in other than a leadership position 5 Non-family leader or employee in a family-owned or controlled business 6 Not associated with a family-owned or controlled business Emotional and Social Competency Inventory University Edition 44 items that measure achievement orientation, adaptability, coaching and mentoring, empathy, inspirational leadership, organizational awareness, pattern recognition, systems thinking, and teamwork. Used by permission. See Measurement Development section of paper for sample items. Motivation to Work in the Family Business - Extrinsic Regulation - Material exm_1 It allows me to make a lot of money exm_2 Because of the job security of working for the family business exm_3 For the fortune I am amassing for myself and my family Motivation to Work in the Family Business - Extrinsic Regulation - Social exs_1 For the various social benefits I get through the family business exs_2 Because a family member(s) expected me to work in the family business exs_3 To avoid being criticized by family members exs_4 To win the respect of family members Motivation to Work in the Family Business - Introjected Regulation inj_1 I really want to succeed in this job and I would be ashamed otherwise inj_2 This business is my life and I don't want to fail inj_3 I have to be a successful successor to my parent or other ancestor who founded business inj_4 Working in the family business makes me feel proud of myself inj_5 I have to prove to myself that I can do this job Motivation to Work in the Family Business - Identified Regulation id_1 The family business is fulfilling my career plans id_2 Because working for the family business aligns with my personal values id_3 Working in this job has personal significance to me id_4 This is the type of career I wanted, so I am achieving my life goal Motivation to Work in the Family Business - Intrinsic Motivation 421

446 int_1 int_2 int_3 int_4 ra_1 ra_2 ra_3 ra_4 ra_5 ra_6 ra_7 ra_8 ra_9 ra_10 ra_11 ra_12 ra_13 ra_14 ra_15 oc_1 oc_2 oc_3 oc_4 oc_5 oc_6 oc_7 oc_8 iaut_1 iaut_2 iaut_3 iaut_4 Because what I do in my work is exciting For the satisfaction I feel when overcoming interesting challenges posed by job I have fun working here For the moments of joy working in this company brings me Leader Responsibility and Accountability Demonstrates a sense of obligation to constituents when making decisions Accepts responsibility for his/her actions within the organization Clearly defines for constituents where his/her responsibilities end and theirs begin Provides constituents with safe ways to address grievances against him/her Avoids making excuses for mistakes Avoids blaming others for mistakes Is willing to face the truth, even when it does not fit his/her personal preferences Accepts responsibility for the future direction and accomplishments of the group Accepts ownership for the results of his/her decisions and actions Looks to himself/herself first when the group s results are disappointing Has held positions within the family firm with real responsibility and accountability Has been held accountable for his/her decisions and actions in the family business Is often shielded from the consequences of his/her decisions and actions (RC) Receives accurate feedback on his/her performance Is held to the same standards as non-family employees Family Climate - Open Communication People don t openly express their opinions (RC) We keep our views pretty much to ourselves (RC) We are polite rather than honest in how we communicate with each other (RC) We regularly talk about things that concern us People are not interested in each other s opinions (RC) We take time to listen to each other We bring issues out in the open, good or bad We are frank with each other Family Climate - Intergenerational Authority The younger generations try to conform with what older generation would want The wishes of the older generation are obeyed The authority of the older generation is not questioned Family members of the older generation set the rules 422

447 iaut_5 iaut_6 iaut_7 iaut_8 iatt_1 iatt_2 iatt_3 iatt_4 iatt_5 iatt_6 iatt_7 iatt_8 We make decisions with every person having an equal say, regardless of seniority (RC) Older and younger members have equal amounts of power (RC) The word of the older generation is law Younger generation is encouraged to freely challenge opinions of older generation (RC) Family Climate - Intergenerational Attention The older generation takes a close interest in the activities of younger generation The older generation shows an active concern for welfare of younger generation The younger generation are expected to look after their own interests (RC) Older members have a protective attitude toward the younger members The young adults are left to their own devices (RC) The older generation is highly supportive of the goals of the younger generation The older generation is very responsive to the needs of the younger generation Older family members are attentive to the concerns of younger family members Family Climate - Cognitive Cohesion cogc_1 We have similar views on things cogc_2 We tend to have widely differing views on most social issues (RC) cogc_3 We have shared interests and tastes cogc_4 Our attitudes and beliefs are pretty similar cogc_5 We do not have much in common (RC) cogc_6 We think alike cogc_7 We have radically different perspectives on things (RC) cogc_8 Our values are very similar Family Business Climate - Vision vsn_1 vsn_2 vsn_3 vsn_4 vsn_5 vsn_6 vsn_7 vsn_8 Management emphasizes a vision for the future We often discuss possibilities for the future Our future as an organization will be better than our past I feel inspired by our vision and mission We are encouraged by management to and build on our strengths Our work is focused on our vision or mission Our purpose as an organization is clear in our vision or mission Management emphasizes our current strengths Family Business Climate - Compassion cmp_1 I do not feel trusted by my colleagues (RC) cmp_2 I feel trusted by my colleagues cmp_3 I care about my colleagues at work 423

448 cmp_4 I do not trust my colleagues (RC) cmp_5 I do not care about my colleagues at work (RC) cmp_6 I trust my colleagues Family Business Climate - Overall Positive Mood opm_1 This is a great place to work opm_2 I enjoy working here opm_3 I do not like working here (RC) opm_4 Working here is a joy opm_5 If I had a choice, I would work somewhere else (RC) opm_6 Overall, it feels good to work here Utrecht Work Engagement uwe_1 At my work, I feel that I am bursting with energy uwe_2 At my job, I feel strong and vigorous uwe_3 I am enthusiastic about my job uwe_4 My job inspires me uwe_5 When I get up in the morning, I feel like going to work uwe_6 I feel happy when I am working intensely uwe_7 I am proud of the work that I do uwe_8 I am immersed in my work uwe_9 I get carried away when I m working Leadership Effectiveness lev_1 Meets leadership performance standards lev_2 Comparison to leadership peers lev_3 Performance as a role model lev_4 Overall leadership success lev_5 Overall effectiveness as a leader 424

449 Appendix G. Common Method Bias Test Results Common Method Bias Test Common Method Bias Test Multi-Raters Only All Respondents Emotional and Social Intelligence, Leadership Effectiveness, Family Business Climate Responsibility and Accountability Std. Reg. Std. Reg. n=382 Weight Weight Std. Reg. Std. Reg. Path With CLFWithout CLFDelta Threshold Weight Weight vsn_8 <--- Vision Path With CLF Without CLF Delta Threshold vsn_7 <--- Vision oa_5_1 <--- OA vsn_6 <--- Vision oa_4_1 <--- OA vsn_5_sq <--- Vision oa_3_1 <--- OA vsn_4 <--- Vision oa_2_1 <--- OA vsn_3 <--- Vision pr_3_1 <--- AR vsn_2 <--- Vision pr_1_1 <--- AR vsn_1 <--- Vision emp_1_1 <--- PETL opm_6 <--- Mood emp_3_1 <--- PETL opm_5 <--- Mood il_2_1 <--- PETL opm_4 <--- Mood il_5_1 <--- PETL opm_3_sq <--- Mood tw_1_1 <--- PETL opm_2_sq <--- Mood tw_2_1 <--- PETL opm_1_sq <--- Mood tw_3_1 <--- PETL cmp_6 <--- COMP tw_4_1 <--- PETL cmp_4 <--- COMP tw_5_1 <--- PETL cmp_2 <--- COMP cm_5_1 <--- CM cm_3_1 <--- CM cm_2_1 <--- CM ao_2_1 <--- ASL Common Method Bias Test Next-Generation Leaders Only Utrecht Work Engagement and Motivation to Work n=182 ad_5_1 <--- ASL Std. Reg. Std. Reg. ad_3_1 <--- ASL Weight Weight ad_2_1 <--- ASL Path With CLFWithout CLFDelta Threshold ad_1_1 <--- ASL uwe_7_1 <--- UWE pr_5_1 <--- ASL uwe_6_1 <--- UWE st_2_1 <--- ASL uwe_5_1 <--- UWE lev_5_1 <--- LEV uwe_4_1 <--- UWE lev_4_1 <--- LEV uwe_3_1 <--- UWE lev_3_1 <--- LEV uwe_2_1 <--- UWE lev_2_1 <--- LEV uwe_1_1 <--- UWE lev_1_1 <--- LEV int_4_1 <--- PURP ra_1_1 <--- RESP inj_4_1 <--- PURP ra_2_1 <--- RESP id_2_1 <--- PURP ra_4_1 <--- RESP exm_3_1 <--- ExtRegM ra_5_1 <--- RESP exm_1_1 <--- ExtRegM ra_6_1 <--- RESP exs_3_1 <--- ExtRegS ra_7_1 <--- RESP exs_2_1 <--- ExtRegS ra_9_1 <--- RESP inj_2_1 <--- FOF ra_10_1 <--- RESP inj_1_1 <--- FOF ra_11_1 <--- ACCT inj_5_1 <--- SucPres ra_12_1 <--- ACCT inj_3_1 <--- SucPres ra_13_1 <--- ACCT id_1_1 <--- CarFul id_4_1 <--- CarFul

450 Common Method Bias Test Next-Generation Leaders and Family Members Only Family Climate n=265 Std. Reg. Std. Reg. Weight Weight Path With CLF Without CLF Delta Threshold cogc_8_1 <--- CogC cogc_7_1 <--- CogC cogc_6_1 <--- CogC cogc_5_1 <--- CogC cogc_4_1 <--- CogC cogc_3_1 <--- CogC iaut_7_1 <--- IAUT iaut_4_1 <--- IAUT iaut_3_1 <--- IAUT oc_1_1 <--- OC oc_2_1 <--- OC oc_3_1 <--- OC oc_4_1 <--- OC oc_6_1 <--- OC oc_7_1 <--- OC oc_8_1 <--- OC iatt_1_1 <--- IATT iatt_2_1 <--- IATT iatt_6_1 <--- IATT iatt_7_1 <--- IATT iatt_8_1 <--- IATT

451 Appendix H. CFA Measurement Models (AMOS) Figure H1. Family Business Climate 427

452 Figure H2. Emotional and Social Intelligence 428

453 Figure H3. Emotional and Social Intelligence, Responsibility, Accountability, and Leadership Effectiveness 429

454 Figure H4. Family Climate 430

455 Figure H5. Utrecht Work Engagement and Motivation to Work 431

456 Appendix I. Matched Data Set (n=100) Base Case Structural Equation and Measurement Model (Smart PLS) CFA and SEM Analyses 432

457 Appendix J. AMOS CFA Measurement Models Part 1 Figure J1. Next-Generation Leader Self-Assessment of Emotional and Social Intelligence Matched Data Set (n = 100) Figure J2. Multi-Rater Assessment of Next-Generation Leader Emotional and Social Intelligence Matched Data Set (n = 100) 433

458 Figure J3. Multi-Rater and Self-Assessments of Next-Generation Leader Emotional and Social Intelligence Full Data Set (n = 567) 434

459 Figure J4. Full Measurement Model: Multi-Rater and Self-Assessments of Next- Generation Leader Emotional and Social Intelligence Matched Data Set (n = 100) 435

460 Appendix K. Common Method Bias Test Results Part 1: Multi-Rater and Self- Assessments of Next-Generation Leader Emotional and Social Intelligence Matched Data Set (n = 100) Std. Reg. Weight With Std. Reg. Weight Path CLF Without CLF Delta Threshold NTW_C <--- NESI NIL_C <--- NESI NCM_C <--- NESI lev_5_sq <--- LEV lev_4_sq <--- LEV lev_3_sq <--- LEV lev_2 <--- LEV lev_1_sq <--- LEV cm_5 <--- CM cm_3 <--- CM cm_2 <--- CM oa_5_sq <--- OA oa_4 <--- OA oa_2 <--- OA tw_5_cub <--- PETL tw_4 <--- PETL tw_3_sq <--- PETL tw_2_sq <--- PETL tw_1_sq <--- PETL il_5_sq <--- PETL il_2_sq <--- PETL emp_3_sq <--- PETL emp_1 <--- PETL uwe_1 <--- UWE uwe_2 <--- UWE uwe_3_sq <--- UWE uwe_4 <--- UWE uwe_5_sq <--- UWE uwe_6 <--- UWE uwe_7_cub <--- UWE ad_5 <--- AD ad_3_sq <--- AD ad_1_cub <--- AD oc_1 <--- OC oc_2_sq <--- OC oc_3 <--- OC oc_4_sq <--- OC oc_6_sq <--- OC oc_7_sq <--- OC oc_8 <--- OC

461 Appendix L. Smart PLS Measurement and Structural Equation Models Part 2 Figure L1. Base Case Model: Next-Generation Leader Assessment of Leadership Development Experiences Matched Data Set (n = 100) Figure L2. Post-Hoc Model: Next-Generation Leader Assessment of Leadership Development Experiences Matched Data Set (n = 100) 437