Changes in decision-making authority when chaebol firms grow: From the perspective of non-family managers

• Main Author: KIM, Changhwan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Chaebol; Family business; Socioemotional wealth; Decision-making authority; Vacant promotion; Business Administration, Management, and Operations; Entrepreneurial and Small Business Operations
• Online Access: https://ink.library.smu.edu.sg/etd_coll/316; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1316&context=etd_coll
• Institution: Singapore Management University

What changes do non-family managers in large family firms such as chaebols (Korean conglomerates) observe in their decision-making authority when their organizations grow? The intuitive expectation is that non-family managers' decision-making authority will grow in conjunction with the successful expansion of the business and growth of the firm. Based on 45 in-depth semistructured interviews with non-family managers from a wide range of chaebol firms, this study analyzes how non-family managers perceive the change in their decision-making authority and the cause of this change. The findings indicate that respondents perceive that their decision-making authority does not increase with the growth of the firm due to risk hedging, social acceptance, and socioemotional wealth preservation. As a firm grows and expands its business geographically and within the same or different business domains, top management often needs to delegate decision-making authority, as it becomes increasingly difficult to process all the information and make appropriate decisions at different levels and in various fields. However, the objectives of family-controlled firms usually concern socioemotional wealth; family control and the transfer of management rights within the family are the most important of these objectives. This fact suggests that family-controlled firms may find it challenging to delegate decision-making authority, even as they grow their organizations. Vacant promotion, or promotion without the corresponding authority, is used instead of genuine promotion or monetary rewards, which contributes to job title inflation, decreased decision-making authority, and eventually non-family managers' perception that they all will become field managers. Conversely, respondents perceive family managers' decision-making authority as becoming fortified with the growth of the firm. Even with the misdeeds and unequal practices of family managers, non-family managers prefer family managers over non-family managers because of the benefit of family management's long-term perspective, which enables more stable business practices and job stability.