Dynastic Monopoly 1

RESEARCH PAPER ON
DYNASTIC MONOPOLY AT CORPORATE WORLD
Reza M. Owasique
ID# 072 314 030
English- 105, Section 7
Course Instructer:
Maleka Sarwar (MkS)
North South University
August 17, 2010
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ACKNOWLEDGEMENT
This research is indebted to the generosity and support of other people. It is a reflection
of casual meetings, heated debates, shared experiences, and a conducted survey. I would like to
begin by thanking my course instructor, Maleka Sarwar, for all her cooperation and time. My
deepest appreciation and gratitude goes to my honorable NSU faculties Mr. AKM Mominul H.
Talukder (MHT) and Faisol Chowdhury (FCy) for their help and encouragement throughout the
research process. I thankfully acknowledge the support of my friends who help me with their
ideas and opinions on my topic during the research process. This research will be greatly helpful
enriching my knowledge about the practical scenario of the corporate world. Moreover, the
particular know how for conducting any formal research would be undoubtedly beneficial for me
in future.
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ABSTRACT
Dynastic monopoly in corporate world in not a new concept for the family owned
business. Along with the positive sides of maintain sphere of family influence, it has some
negative issues of having the risk of losing competitiveness because of ineffective managerial
policies. Complication generated from family monopoly is also not a subtle issue. Dynastic
monopoly causes severe consequences for a company because of inappropriate selection of top
level executives. Self conducted survey showed that dynastic monopoly is an established concept
which is practiced widely and the reason behind of the monopoly is avoiding outsiders
intervention in the business. Succession planning is the main tool to promote or engage any top
level officials for a family owned company. Negative consequences can be minimized if
companies go for the selection of the managers on the basis of leadership capability. Only
maintaining kinship regardless of the individuals managerial attributes will not ensure the
organizations competitiveness.
Dynastic Monopoly 4
INTRODUCTION
The concept of dynastic monopoly is not a new one in corporate business. From the very
earlier period of time family inheritance influences corporate world significantly in terms of
controlling operational activities, decision making process and achieving organizational goal of
family owned businesses. Usually family monopoly focuses on collectivistic organizational
culture where organization makes profit though the collective effort of the top level managers.
An organization usually operates in same corporate culture year after year because of
dynastic monopoly. This condition is beneficial when everyone is delighted with the
authoritative measures of the leader. Sometimes it happens higher level manager lacks the
managerial skills which lead to employee dissatisfaction and failure in achieving goals. This
issue is not quite unfamiliar. In fact this is one of the common problems in corporate world
nowadays. Many good organizations plunge into failure because of not having sufficient
professional expertise and leadership capability of individuals. This problem arises when family
owned companies go for only succession planning regardless of the possibilities of available
talented workforce outside the organization.
Following through the negative side of dynastic monopoly in corporate world this is to be
evident sometimes that existing workforce in certain family owned organization might get misled
or poorly directed to the organizational goals due to ineffective management. Also there are
some other problems that can pop out of this issue are favoritism towards family members, lack
of employee coordination in decision making, difficulty in implementing new organizational
cultures and structures etc.
Dynastic Monopoly 5
BACKGROUND
Family-owned firms are one of the foundations of the worlds business community. Their
creation, growth and longevity are critical to the success of the global economy. Although facing
many of the same day-to- day management issues as publicly-owned companies, they must also
manage many issues specific to their status. Dynastic monopoly sometimes is beneficial in many
ways but at the same time it might be the reason of losing organizational competitiveness, as a
whole establishment purpose of any company when there is an unwise selection of management.,
Managing family is a delicate matter, and it is important to be aware that the fastest way to
alienate the people that work for you is to create a company culture based on nepotism. Everyone
wants to help out family, but hiring, promoting, and paying someone based on a familial
relationship rather than on their actual merits and abilities, is a recipe for disaster.
You will quickly find that non-family employees will lose the motivation and desire to
work for you. In addition, family employees may become complacent because they will not face
consequences for non-performance. Ultimately, nepotism does not empower your employees,
and as a result your bottom line will suffer (Tina Indalecio n.d.).According to Liebowitz ( 2008)
, If anyone asks, who will be the next leader? typical situation is where all off-spring, whether
employed in the business or not, become potential heirs to the business despite the wishes of
those working in the business. Another scene entails the heir who lacks the requisite skills to be
the president when another option (e.g., the sale of the business, a non-family member becoming
president, etc.) would have been by far the wiser choice. From the perspective of Cadbury (n.d),
the problems arise from two sources. The first is the reverse side of the coin of family
commitment. Commitment derives from the family seeing the business and their family life as
Dynastic Monopoly 6
one, as a unity. There is no separation between family relationships and business relationships
and no relief from the one in the other. Other sources of difficulty are the growth of the firm and
the passage of time. The founders of firms and their immediate family may well be able to
manage their relationships successfully, because the business hierarchy will probably match that
of the family. This straightforward pattern of relationships may not hold when it becomes a
question of bringing in the second generation of what by then will be an extended family.
Equally important, if a family firm is growing it will have to draw in managers from outside the
family. This will require management of the relationships between family and non-family
members of the firm. The sharing of power, which the acceptance of non-family managers
requires, is one of the hardest issues for family firms to come to terms with (pp. 7-8). Authentic
leadership is a concept that has many advantages to family business executives because it helps
them appreciate the importance of both the technical dimensions of their work, such as planning
a marketing campaign, and the human dimensions, such as developing more effective
interpersonal relationships. (How to lead your family business, 2009, p. 49).Faisol Chowdhury
also claimed that preference of family member in management should be the first priority in
family enterprise (personal communication, August 4, 2010).Additionally, Mominul H. Talukder
thinks that management department are kind of obsessed with maintaining family kin in
organization if they do not find any then will go for outsider recruitment (personal
communication, August 4, 2010).All these above mentioned issues basically indicate that with
the appreciating positivity of this concept, there are certain probabilities of encountering hurdles
in terms of managerial discrepancy due to lack of appropriate leadership practice in organization.
Reflecting on the requirements of organizational competitiveness as a first priority might help
those problems to be properly handled.
Dynastic Monopoly 7
HYPOTHESIS
The purpose of conducting the research is finding out some issues that is rolling into my
mind. Those questions are known as research questions. The queries which are supposed to be
highlighted in this research are as follows
What does the term dynastic monopoly mean?
Is this concept implemented in our country?
Why do family owned organizations follow this trend?
Should an organization follow the trend of dynastic monopoly regardless of its members
leadership capability?
What are the consequences if an incapable managing director is in charge?
What might be the reaction inside the organization when the employees feel like outsiders?
How will the more capable employees feel when those incapable members are snubbed and
superseded?
What should be preferable maintain family trend or keeping corporate environment smoothly
operating?
Hereditary succession is maintaining kinship in family owned business where individuals
from the owners family take over the business through family inheritance. This concept is
established in our country as most of the family owned businesses in our country follow this
trend. This is because of maintaining a bonding between the family and the business. Moreover,
it is also a matter of security for the business to keep the business away from outside
Dynastic Monopoly 8
intervention. From the self conducted survey it was also proved that family owned businesses
usually prefer the promoting managers from the existing workforce as they do not want any
outside participation.
In my opinion like everything else this trend is not free from the shortcomings. It is better
to have someone from the family having the authority to regulate certain business but his/her
contribution might be sometimes questionable. Greater focus on maintaining kinship may result
in ending up with an under qualified top level manager which is no way acceptable for the
betterment of the organization. If too much favoritism is practiced inside an organization existing
employees might get disheartened and de-motivated as they perceive themselves as of less
importance. This should not be the scenario of a business organization. But the survey indicated
slightly different scenario as most of the respondents supported the degradation of workplace
comfort and freedom. Employees become less interested to interact and their job duty and
responsibility also become vague due to ineffective management. The problem of assessing the
abilities of family entrants is compounded when it involves an older generation judging a
younger one (Cadbury, n.d., p.14).
Dynastic monopoly causes severe consequences for a company because of inappropriate
selection of top level executives. In order to improve this problem HR (human resource)
department should be aware of the corresponding aftermath of considering only dynastic
monopoly in selection process. In Bangladesh many corporate cultures is based on the favoritism
and dynastic monopoly regardless of the leadership capability. If every family owned business
organization delegates superior position to individual just for the sake of keeping dynastic
monopoly then success of the organization will be at stake eventually.
Dynastic Monopoly 9
RESEARCH METHODOLOGY
A survey questionnaire on the broad areas of dynastic monopoly and its impact on
organization that consisted of 11 questions with detailed options to choose from was used to
conduct the survey. It was surveyed among 30 respondents and the respondents were mainly the
corporate officials.
Two formal interviews were also executed, where the interviewees answered certain
questions related to the topic. The answers were totally subjective. They discussed about the
topic, its pros and cons and the acceptance of such a issue. The two interviewees each had almost
same views and opinions towards the subject at hand. This provided information from both the
angles and thus helped to reach an objective conclusion.
Secondary materials included published research and writings by other people and some
real life cases. Articles, books and journals were used to learn what these people said and wrote
about the topic. It also provided their reactions and view points. Some real life cases revealed
insight into actual outcomes of legal proceedings with a religious aspect.
SURVEY RESULTS & GRAPH ANALYSIS
The results that are graphically presented below are based on the survey conducted.
Thirty people were surveyed to get a better picture and it comprised of 15 male and 15 female
respondents. Equal numbers of female and male were surveyed to have an objective result.
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Figure: 1
This graph is based on the public opinion about why family owned organizations have a
dynastic monopoly in the corporate world.
According to the graph, it is illustrated that out of 30 respondents who are corporate
officials from different job positions, 7 respondents (23.33%) said that family owned
organizations prefer dynastic monopoly in order to ensure proper family control. For protecting
organizations conventional trend dynastic monopoly is practiced; 11 respondents (36.66%)
think that. The other 12 respondents (40%) pointed out that dynastic monopoly is practiced in
order to avoid outsider intervention in organization. So, this is evident that majority of the
respondents are voting the avoidance of outside manager in the organization to maintain the
family owned business.
7
11
12
0
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
Ensuring family control Protecting
organization's
conventonal trend
Avoiding outsider
intervention
Other
Options
N
u
m
b
e
r
o
f
r
e
s
p
o
n
d
e
n
t
s
Dynastic Monopoly 11
The majority of the corporate officials think that organizations prefer family domination
especially when that is a family oriented business. That is why these businesses show less
interest most of the time, to hire employees for the management position from outside talent
pool. They usually go for succession planning, which means promoting of internal managers for
the higher position. From the perspective of the corporate officials, there is always an insecurity
that remains in owner of the organization that his/her company in not snatched away from their
grasp. Therefore out of 30 people 40% of them suggested the tendency of avoiding outside
officials.
Figure: 2
This graph is based on a public survey on issue which is faced mostly in the family owned
organizations.
According to the graph, there are four options and 30 respondents. 34% of the corporate officials
said that in the family owned organization issue that is mostly faced is favoritism towards family
members. Then 33% of them referred to the issue of manipulating overall work performance. The other
34%
33%
10%
23% Favoritism towards family
members
Manipulation in overall work
performance
Less employee coordition with
top level management
less tendency of hiring outside
talent for the manager position
Dynastic Monopoly 12
23% of corporate officials assumed that the issue mostly faced in family oriented business is hiring less
number of outside individuals for management. Finally, the rest which is 10% believe that less number of
employees will freely interact or co ordinate with their supervisors or managers if that is a family owned
business. This is visible that most of the employers are voted for favoritism as a mostly faced issue in
family business, less employee coordination with top level management has the lowest votes. The major
reason behind voting favoritism might be the natural concept of the family owned business. If a
business is built and operated by a family, it is natural instinct that the family members might get
the flexibility in terms of less restrictions and more performance appraisal. This is a sort of
instinctive that, to protect family values, the family member who is working in an organization
will be of higher preference. Thought that may create other employees dissatisfied but regardless
of that fact favoritism is practiced significantly in the family owned organization
Figure: 3
5
7
11
7
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
Organization will not be
able to maintain its
competitiveness
Disorganized guidelines
will lead to lack of
coordination
Work environment will
be badly affected by
the ineffective
regulation
Decision making
process and strategic
implementation will be
disrupted
Options
N
u
m
b
e
r
o
f
r
e
s
p
o
n
d
e
n
t
s
Dynastic Monopoly 13
This graph is based on the opinions of the corporate officials on consequence that is faced
by a family owned business if that has a incapable managing director in charge.
According to the graph, 30 respondents are surveyed and there are four different options.
Out of 30 officials, 5 officials (16.66%) voted for the option that organization will lose its
competitiveness because of an incapable manager. On the other hand, 7 respondents (23.33%)
believe that due to ineffective manager company will suffer from messed up situation due to
disorganized guidelines and that will lead to lack of coordination throughout the organization. 11
respondents (36.66%) refer to the fact that organizations work environment will be badly
affected by the ineffective regulation. Finally, rest of 7 respondents (23.33%) point out the issue
that decision making process and strategic implementation will be disrupted due to inefficient
manager.. This is visible that majority of the respondents voted the risk of work environment
getting affected by faulty regulations. The lowest votes referred to the inability of maintaining
competitiveness.
The reason behind why majority of the respondents which is 36.66%, believe that work
environment will not be compliant is the misleading behavior of managers. As a manager, it is
necessary to lead the workforce to right direction for achieving organizational goal. To achieve
goal employee workplace comfort, interaction, problem identification and solution are needed to
be ensured. If the managing director cannot identify the employees demands and work facilities
properly and timely then freedom of work and comfort level will decrease.
Dynastic Monopoly 14
SUMMARY OF FINDINGS
After all the data analysis and calculation I came to the decision that some of my
hypothesis are right and at the same time some of are proved to be slightly different. The overall
effects of dynastic monopoly come out from the primary sources which are the survey
questionnaire. According to the data found by the self conducted survey it can be said that
dynastic monopoly in a business policy which is practiced everywhere from the very past at an
increasing rate. This policy is still familiar in the family owned organizations and most of the
family enterprise uses this method of maintaining dynastic monopoly widely. (Appendix, fig.
4).It was found that dynastic monopoly is practicing by the family enterprise in order to avoid
the outsider intervention as they do go for internal recruitment for the managerial position at the
first place. Favoritism is an issue which is mostly faced and organizations work atmosphere can
be badly affected due to ineffective management is family business. Also, there will be less
interaction of employees with the management officials. (Appendix, fig. 6).Then less
administrative authority should be delegated (appendix, fig.7) and that manager should be under
supervision of experienced officials.(appendix, fig.8).In order to minimize this problem, HR
department should recruitment individuals based on their work experience (appendix, fig.5)
SUGGESTIONS
Based on the results of survey, the identified problems regarding dynastic monopoly can be
resolved with the help of some effectively implemented actions. Steps should be taken in order to
minimize the consequence of dynastic monopoly in the corporate world are:
Recruitment of appropriate managers from the outside talent pool.
Dynastic Monopoly 15
Effective training and development programs can be introduced for the ineffective managers.
Managers need to be designated for a higher position based on the leadership capability.
Clearly define the goals of the company and making sure everyone is on the same page.
Outline each family employees role and responsibilities and hold them accountable.
Keeping an open line of communication at all times.
Address all concerns quickly and in a non-emotional manner.
Create a fair promotion and salary system that is based on individual merit and ability.
Taking a management course to learn how to separate your emotions from the management
process.
Providing opportunities for advancement in business for non-family employees.
CONCLUSION
Authentic leaders recognize
the emotional impact of their
leadership style------ anonymous
Dynastic monopoly in corporate world turns out to be a reason of failure of a company if
managers are recruited only based on family inheritance and organizational goals get sidetracked
by the ineffective managerial capacity. Managements decisiveness is a critical success factor in
any organizations ability to deal with threats and give the employees a sense of purpose and
safety. Nowhere is management more second-guessed than in making the tough decisions about
closing businesses or divisions, delaying new initiatives, cost cutting or layoffs. Unfortunately
Dynastic Monopoly 16
management teams often fail to make the tough decisions and instead opt for a process that could
best be described as a death of a thousand cuts. That is why to minimize the lacking of skills
for decision making; succession planning should not be the only focus for the managerial
promotion. Deserving outside talent recruitment also demands to be ensured for the smooth
business operation.
Dynastic Monopoly 17
REFERENCES
Cadbury, A. (n.d.).Family firms and their governance: creating tomorrows company from
todays.Retrieved August 04, 2010 from
http://rru.worldbank.org/Documents/PapersLinks/family_firms.pdf
Carlock, R. (2009).How to lead your family business out of the crisis. Retrieved August 04,
2010, from www.fbnpa.org/pdf/Public/Insights/Carlock.pdf
Graves, E.G. (1991). keeping it in the family.Black enterprise. 22(5). 104
Indalecio, T. (n.d.). 5 Common Threats to a Family Business. Retrieved August 4, 2010, from
http://familybusiness.about.com/od/managementandoperations/a/commonthreats.htm
Liebowitz, B. (n.d.). Myths about the family owned business. Retrieved August 4, 2010, from
http://www.liebowitzassoc.com/articles/mythsaboutfamilybusiness.shtml
Nelton, S. (1990, January). Earning one's good fortune - pitting inheritance against merit in
family business. Retrieved August 4, 2010, from
http://findarticles.com/p/articles/mi_m1154/is_n1_v78/ai_8287677/?tag=content;col1