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Goal Setting in Family Firms:
Goal Diversity, Social Interactions, and
Collective Commitment to Family-Centered Goals
Josip Kotlar
University of Bergamo
Center for Young & Family Enterprise
Via Pasubio 7B, 24044 Dalmine (BG) – Italy
josip.kotlar@unibg.it
Alfredo De Massis
University of Bergamo
Center for Young & Family Enterprise
Via Pasubio 7B, 24044 Dalmine (BG) – Italy
alfredo.demassis@unibg.it
Please cite as: Kotlar, J. & De Massis, A. (2013). Goal setting in family firms:
Goal diversity, social interactions, and collective commitment to family-centered
goals. Entrepreneurship Theory and Practice, 37(6).
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Goal Setting in Family Firms:
Goal Diversity, Social Interactions, and
Collective Commitment to Family-Centered Goals
ABSTRACT
Goal setting in family firms is very complex due to the interplay between family and business
systems. However, this topic is largely overlooked in family business research. In this qualitative
study of goals and goal formulation processes among 76 organizational members across 19
family firms, we identify goal diversity as a direct consequence of the overlap between the
family, ownership and business systems. We found that goal diversity is expressed more strongly
in the proximity of generational transitions, triggering social interaction processes through which
organizational members contrast their goals. Our findings suggest that different types of social
interactions lead to different behaviors, with familial social interactions being more effective
than professional social interactions in managing goal diversity toward the formation of
collective commitment to family-centered goals.
INTRODUCTION
Goal setting, in all organizations, is a vital function through which individual goals are
transformed into organizational policies and actions (Cyert & March, 1963; Simon, 1964). For
family firms, these activities are likely to be more complex owing to the unique systemic
interactions between the family and the business (Habbershon, William, & MacMillan, 2003). A
family can use its power and discretion to influence decisions and foster the adoption of family-
centered goals (Chua, Chrisman, & Sharma, 1999; Chrisman et al., 2012). Given that family
firms are very common (e.g., La Porta et al., 1999), and given that family-centered goals play an
important role in the theory of family firms (Chrisman & Patel, 2012; De Massis et al.,
forthcoming; Habbershon et al., 2003), it is surprising that only limited attention has thus far
been paid to how organizational goals are determined in these organizations (De Massis et al.,
2012). Thus, addressing the issues underlying the goal formulation processes in family firms
appears warranted.
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The family is seen as a dominant group within the family firm (Chua et al., 1999).
According to Cyert and March (1963), it follows that family-centered goals will become more
salient as the family coalition increases its representation and authority within the organization.
However, the relationship between family involvement and the adoption of family-centered goals
is likely to be complex, and mediated and moderated by several factors (Chrisman, Chua, &
Sharma, 2005; Chrisman et al., 2012). Goal setting involves individuals, groups and firms,
nevertheless, the relatively scarce studies available are limited to the firm level, typically relying
on single informants (e.g., Chrisman et al. 2012; Tagiuri & Davis, 1992) and overlooking the
individual organizational member’s role in the process. In this study, we attempt to broaden and
refine the extant theory in the area of organizational goals and goal formulation processes in
family firms by addressing the following research question: How do the individual goals of
organizational members influence the organizational goals pursued by family firms?
Given the ambiguities inherent in multilevel research, qualitative methodologies were
considered particularly appropriate to accomplish our purpose (Hitt et al., 2007). We undertook
interviews and gathered non-participant observations and archival documents from 19 family
firms; thereafter analyzing these qualitative data to disclose the unexplored dynamics of goal
setting in family firms. The evidence presented in this article refines and extends current
understanding of how family involvement engenders the adoption of family-centered goals in
organizations, and offers new insights on intra-family succession as an ideal occasion for
challenging the status quo and fostering the restabilization of new organizational goals. Finally,
this study reveals the critical contribution that studying these aspects of goal setting can make to
theory building in the area of organizational behavior and stakeholder management, as well as
enhancing practical understanding of organizational goals in family firms.
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The article is organized as it follows: in the next section, we set the foundations for our
study by reviewing insights from prior research on goal setting and from family business
literature. In the third section, we outline the research design and methods. Thereafter, we
present the key findings and the inductive process that led us to formulate our theoretical
propositions. Finally, we discuss the implications of our findings and draw conclusions.
BACKGROUND
Organizational goals are an important yet controversial concept in organization theory
(Argote & Greve, 2007; Cyert & March, 1963; Simon, 1964). In contrast to the economic
approach of modeling firm decisions made by unitary actors, organizational theorists challenge
the assumption that organizations have simple, well-defined goals and conceive work
organizations as political entities in which coalitions are formed among individuals to influence
the goals that the firm will pursue (Cyert & March, 1963; Stevenson, Pearce, & Porter, 1985).
According to this perspective, organizational goals may change over time, reflecting the goal
setting processes among coalitions that presumably pursue conflicting and inconsistent goals
(Cyert & March, 1963). Thus, defining the goals adopted by an organization requires specifying
who is able to influence firm decisions, the elements that may affect their individual goals and,
more importantly, the processes through which the individual preferences are translated into
organizational policy and action (Stevenson et al., 1985).
Some researchers assume that the relative importance of different goals in an
organization is a function of the power of individuals or groups of individuals in decision-
making processes (e.g., Cameron, 1978; Pearce & DeNisi, 1983). The theory of stakeholder
salience (Mitchell, Agle, & Wood, 1997), for example, suggests that managers pay sequential
attention to internal and external stakeholders based on the evaluation of their attributes of
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power, legitimacy and urgency. However, managers are not necessarily a cohesive group (e.g.,
Pitcher & Smith, 2001), and thus can only loosely be defined as a coalition. Furthermore, several
organizational members can influence firm behavior through their decisions in different
organization units (Simon, 1964), while goal setting processes do not necessarily follow
hierarchical arrangements among coalitions (Jacobides, 2007; Pfeffer & Salancik, 1977;
Stevenson et al., 1985). Consequently, in order to avoid implementation gaps, the formulation of
organizational goals cannot be limited to the top management team, but should also involve other
individuals at different levels of the organization (e.g., Floyd & Wooldridge, 1992).
According to Cyert and March (1963), organizational goals are formed through a process
that is articulated in three steps: first, coalitions are formed and coalition goals are defined
through internal bargaining and side payments; second, goals are stabilized and elaborated into
control-systems that define policy constraints to organizational member actions; finally,
organizational goals are continuously updated on experience gained (Cyert & March, 1963, p.
33). Research in social psychology and political science provides further insights in this regard,
suggesting that individuals purposefully form coalitions to pursue their goals (e.g., Pearce &
DeNisi, 1983), and that coalitions will tend to be inclusive to increase their bargaining power and
maximize policy outcomes for its members (e.g., Komorita & Chertkoff, 1973; Rosenthal, 1970).
Combining the insights from this body of research with the description of goal setting processes
proposed by Cyert and March (1963), Stevenson et al. (1985) concluded that the problem of
defining organizational goals is closely linked to that of defining coalitions. They suggest that
coalitions are continuously formed in organizations in response to variations in organizational
resources, creating conflicts among organizational members and subsequent bargaining
mechanisms that lead to determining joint actions.
