Business Planning Practices of Family-Owned Firms within a Quality Framework*

Study purpose is to investigate the contribution of an integrated, interfunctional approach to quality management, inclusive of family/business interface management, to the success of 572 small family firms, using multiple measures of success (congruity and business revenues). A positive customer reputation was the most important business goal for 44.6 percent of firms. Interface and business management significantly explained business revenue and congruity between business and family while controlling for owner and business characteristics. Family/business interface management explained 9.7 percent of congruity variance and 8.2 percent of gross revenue variance, whereas business management explained 3.3 percent of congruity variance and 2.2 percent of gross revenue variance. Quality management provides a competitive advantage for small firms (Upton, Teal, and Felan 2001; Kalleberg and Leicht 1991), but research on small firm quality management has been scant, and what does exist is primarily conceptual rather than empirical (Kuratko, Goodale, and Hornsby 2001). It also tends to be practitioner-oriented. Furthermore, with the focus of scholarly quality management research on large organizations, little understanding exists about quality practices of small family firms. Small firm quality research is needed because large corporations cannot fully implement organization-wide process quality initiatives (e.g., Total Quality Management or the more recent Six Sigma) unless their smaller suppliers provide them with quality products and services (van der Wiele and Brown 1998). The U.S. quality management movement has progressed from an initial emphasis on operations management within the manufacturing industry to a systems approach to quality, inclusive of all phases and aspects within the firm across a wide variety of industries (Reed and Lemak 1996; Benson, Saraph, and Schroeder 1991). Such an integrated, interfunctional approach to quality management has been proposed as a means of achieving and sustaining competitive advantage (Flynn, Schroeder, and Sakakibara 1994), but a perception exists that small firms do not have the resources necessary to effectively implement integrated quality initiatives (Beheshti and Lollar 2003). Research on small business management indicates that formalized business planning leads to better performance (Ibrahim, Angelidis, and Parsa 2004; Miller and Cardinal 1994; Schwenk and Shrader 1993; Kalleberg and Leicht 1991). However, quality management is often missing in small business planning research (Yusof and Aspinwall 1999; Shraph, Benson, and Schroeder 1989). Although there are separate literature bases within the small business literature for quality management and business planning, there is scant research addressing the integration of the two topics, although they are considered inseparable corporate activities (Bennington and Cummane 1997; Vinzant and Vinzant 1996). A more systemic and integrative study of quality management in the small firm should thus include an examination of formalized business planning practices within the context of quality management. Additionally, given that family system interactions can be extensive in small private firms (Yilmazer and Schrank 2006; Stewart 2003), investigating quality management should not be restricted to business management alone, and, if quality management is inclusive of all phases and aspects within firms, perhaps quality management needs to be defined differently for small private firms to include family/business interface management. Employee structure of family businesses is unique in that there are both family and nonfamily employees affecting firm culture where quality practices are executed. As a result, any quality management study of small private firms would be remiss if it did not include family/business interface management. Furthermore, if an integrated, interfunctional quality management framework were to be utilized, it would be important to view small firm success not just from a traditional, financial perspective but also from a nonfinancial perspective, which would take into consideration that the great majority of small businesses are family-owned (U. …