Family-led learning through parenting in family business

Abstract

This paper aims to conceptualize a family business parenting approach called family-led learning to break the third-generational curse in family business. This means that family business can hardly surpass the third generation. Family enterprises is expected to represent approximately 40 percent of the world’s largest corporations by 2025, but this will not come to realization if parenting approach is not learned by the leaders of the family and experienced by the next generations. In Indonesia, family business composes around 95 percent of all the businesses and contributes about 80 percent to the country’s economy. Since it is crucial to sustain the family business in Indonesia, theorizing the parenting approach for succession is vital. Applying grounded theory, this inquiry constructed the “Parenting to Equip” category in Parenting–Harmonizing–Collaborating (PHC) theory by interviewing 28 participants from four family conglomerates that are public-listed companies and are planning beyond the third generation. Next, this study integrated the Community of Inquiry (CoI) theory to the “Parenting to Equip” component to create a deep and meaningful learning experience. This results in the Family-Led Learning in Family Business (FLL-FB) concept that enable effective parenting to equip the next generations. This novel insight denotes parents of family businesses must incorporate entrepreneurial training into their parenting practices through nonformal learning experiences in informal learning environments to equip the next generations become potential successors.

Introduction

Family businesses are essential for the welfare of life and creation of wealth in our societies nowadays. The current trends shown by McKinsey and The Economist denoted the rise in family enterprises that will account for approximately 40 percent of the world’s largest businesses. In the private sector of emerging economies, according to McKinsey Quarterly, around 60 percent of the firms that generate more than $1 billion are family-owned (Bjonberg et al., 2014). According to the Family Firm Institute (2017), family businesses employ between 50 and 80 percent of workers in many countries and contribute between 70 and 90 percent to the global gross domestic product.

In Indonesia, as Deloitte Indonesia Country Leader Claudia Lauw mentioned that more than 95 percent of all businesses in Indonesia are family businesses (Razook, 2016; The Jakarta Post, 2019) and contributes about 80 percent to the country’s economy (Wahjono et al., 2014). However, despite their significance, family businesses seldom endure for multiple generations (Ungerer & Mienie, 2018; Ward, 2016). Seventy percent of family-owned businesses fail or are sold before the second generation can take over, 13 percent make it to the third generation, and only 3 percent to the fourth generation (“Journal of Family Business Strategy: 2012 Call for Papers”, 2012; Mangalandum, 2013; Zellweger, 2012). Family businesses typically endure 24 years, the same duration as the founder’s tenure (Goto, 2014). In Indonesia, Deloitte (2019) estimated that in 2019, only 13 percent of Indonesian family businesses will survive into the third generation. Thus, family businesses continue to suffer from the “third-generational curse” (fu bu guo san dai) despite their efforts to pass the torch (Ng et al., 2021; Tan et al., 2019).

One of the most significant reasons for family business not able to break the third-generational curse is parenting. Therefore, models for parenting effects in family businesses has to be further developed (Shanine et al., 2023). In Harvard Business Review, Allen (2022) pointed out that parents often were the “orchestrators” of promoting resilience in family business, and “it was the role of the parents in providing experiences as learning opportunities.” (para. 5) Thus, this study focused on elucidating how parenting can be applied in family business by integrating the Community of Inquiry (CoI) theory to the Parenting to Equip in the Parenting–Harmonizing–Collaborating (PHC) theory. As such, the theory and application of parenting are elaborated and enhanced to break the “third-generational curse” (fu bu guo san dai).

Literature review

According to Duan et al. (2022) and Mitchell et al. (2022), the flow of explicit and tacit knowledge to other stakeholders in the organization has been lacking but crucial for its longevity. This is incredibly challenging when codifying tacit knowledge (Lee & Gomez, 2021). An intentional and structured life experience is part of nurturing younger generations involved in the family business; it is not only formal education but essentially informal education (Tan et al., 2019). Therefore, this article presents an integrated learning procedure for parenting which is crucial to the entities’ long-term viability.

Equipping next generations in Indonesia

There is a probability for Indonesian parents to live under the same roof with the children even after adulthood, thus creating a complex environment in family contexts (Johar & Maruyama, 2011; Widhowati et al., 2020). With the nation established its independence in 1945 with the principles “gotong-royong” which means “mutual cooperation” or “mutual assistance” (Iskandar, 2016; Weatherbee, 1985), it is not surprising that Hofstede’s cultural dimensions on Indonesia compared to other nations, it is considered a collectivist nation with relatively high power distance (Hofstede, 2007, 2010). The high power distance creates a challenge for equipping the next generations in family business. Even though it is part of the Indonesian culture that children are generally taught to be obedient and helpful to their parents (Eisenberg et al., 2001; Farver & Wimbarti, 1995) and that ageing parents are usally still supportive towards their children and grandchildren (Schröder-Butterfill, 2004), these cultural norms still do not diminish the family business third-generational curse.

When talking about being a parent or grandparent, the role of the founder is significant. Founders know how important it is to pass on their lessons without making the same mistakes and harsh conditions. Most founders approved that nurturing their children is fundamental to forging their children’s resilience and entrepreneurial spirit (Marquis & Tilcsik, 2013; Tan et al., 2019; van Wyk, 2013) and shaping them to live a vigilant and modest lifestyle. Many other researchers (Corbetta & Salvato, 2004; De Vries, 1993) have stated that the founders are responsible for identifying and communicating a set of well-established values that will help the business grow and succeed and ensure a smooth transition to the next leader. Over time, the values of the founder evolve into the “family’s values or traditions” that underpin family and firm governance (Suddaby & Jaskiewicz, 2020; Tan, 2021), and business culture. Mothers and grandmothers also assist in effective parenting in family businesses (Lambrecht, 2005). The survival of the family enterprise requires incorporating the next generation (Handler, 1992; Ng et al., 2021), and each generation must educate the next (Cabrera-Suárez et al., 2001).

Parenting, formal education, entrepreneurship instruction, upholding family values, and learning from external stakeholders are lifelong processes of soft element transfer. Entrepreneurship, values, freedom, outside experience, upbringing, and education are examples of soft factors (Lambrecht, 2005). The families hope the next generation will be vigilant and live modestly due to their efforts. Parents expose their children to numerous successful and unsuccessful individuals and their failures. This is supported by Cabrera-Suarez et al. (2001) Almeida’s research. According to research and interviews, parents must teach their children problem-solving and update their children’s soft skills. According to Olson et al. (2003), the success of a family business is frequently contingent on how well the family works together and solves problems.

Founder believes that for the younger generation to survive, they must live modestly, avoid excess, and remain vigilant at all times (Cahyadi, 2022; McMullen & Warnick, 2015; Ng et al., 2021). It is also about anticipating crises in good times and grasping opportunities in bad times. (Ng et al., 2021; Olson et al., 2003; Tan & Fock, 2001; Tan et al., 2019; van Wyk, 2013). Intriguingly, family involvement is crucial at home, where parents, especially mothers and fathers, must work together to raise children. Other researchers have also noted the mother’s importance in raising the next generation (Lambrecht, 2005; Lambrecht & Donckels, 2008).

Founders of large companies that are known nationally and regionally usually start with an idea, notion, or concept that combines their failures and successes. These ideas become the company’s values, which are part of its culture and partly its credo or mission (Cahyadi, 2022; Lussier & Sonfield, 2009; Ng et al., 2021). To pursue their dreams and family goals, which are the founders’ compelling purposes, the younger generation must comprehend and uphold the values and noble ideas of the founders. Based on their own experiences, founders may formulate a “theory” of success (Cahyadi, 2022; Ng et al., 2021). Great companies usually started from people with great influence and power. For business owners and other entrepreneurs, they are successful, admired, feared, and egotistical (Kets de Vries, 1993; Miller et al, 2003).

Parenting–harmonizing–collaborating (PHC) theory

The primary discussion of this study, intergenerational business perpetuation, was addressed by Cahyadi’s PHC Theory (2022): “Parenting, Harmonizing, and Collaborating”. The founders prioritize parenting, collaboration, and harmony to ensure the survival of the family business and family leadership in the second and third generations. To sustain multigenerational family businesses, the PHC Triangle is proposed and depicted in Fig. 1.

Fig. 1

Parenting–Harmonizing–Collaborating (PHC) framework (Cahyadi, 2022)

Cahyadi (2022) denoted that parenting would teach the following generation leadership skills, character, and values. The founders frequently brought their children and grandchildren to business functions, partner meetings, and domestic and international business travel. In addition, the founders exposed their children to external stakeholders, including the entrepreneur, family and non-family executives, bankers, consultants, customers, and suppliers. Encouragement of such learning is a common tactic employed by successful family businesses (Handler, 1992) to develop an early interest in business among children. Ketokivi and Castaner (2004) investigated the significance of attracting people to the business and recognizing the value of family in the business.

The element of harmonizing describes strategies for family member cooperation and collaboration. The element of collaboration describes the crucial role of non-family members as corporate professionals and how to work with them. The family owners’ main concern is business survival, which this theory of Parenting–Harmonizing–Collaborating (PHC) shows how Indonesian family business founders pass on their business to the next generations.

CoI (community of inquiry)

Garrison et al. (2001) formed the Community of Inquiry (CoI), a significant educational theory (shown in Fig. 2) that can contribute to the field of a family business. The CoI theory has a decades-long publication, evaluation, and application history. The theory’s website can be found at history https://coi.athabascau.ca. It is an interactive website that compiles published research on the CoI and provides a discussion forum for researchers and practitioners with interest in the topic. The theory has stood the test of time for over two decades. This theory can assist FLL-FB educational specialists in enhancing the FLL-FB learning experience. The (CoI) learning model was developed by Garrison (2011) and Garrison et al. (2001) to assist educators in developing meaningful and profound learning experiences.

Fig. 2

Community of Inquiry (CoI)

The CoI stated that “an educational Community of Inquiry is a group of individuals who collaboratively engage in purposeful critical discourse and reflection to construct personal meaning and confirm mutual understanding.” The CoI framework demonstrates that creating a rich and meaningful (collaborative-constructivist) learning experience requires the development of three interdependent and overlapping elements: teaching and cognitive presence.

The teaching presence is our first topic of discussion. In the CoI framework, Anderson et al. (2001) define teaching presence as designing, facilitating, and directing cognitive and social processes to achieve personally meaningful and educationally valuable learning outcomes. Teaching presence is not the same as “teacher presence”. It has a broader meaning than “teacher presence” because it includes all processes that occur prior to the actual teaching. Teachers have a teaching presence when they “set curriculum and methods”, “shape constructive exchange”, and assist students in “focusing on resolving the issue” (Garrison, 2011).

The social presence comes next. According to Garrison (2011, p.31), social presence is a person’s ability to identify with a group, communicate on purpose in a safe environment, and cultivate personal and affective relationships over time by displaying their own personalities. Moreover, it involves cognitive presence. It is defined as “learners’ capacity to construct and confirm meaning through sustained reflection and discourse.” (Garrison 2011, p.24). The cognitive presence can be achieved, according to Garrison (2011), if teachers follow the process of “triggering event” by creating a sense of perplexity, “exploration” by developing information exchange, “integration” by connecting ideas, and “resolution” by applying new ideas. A “deep and meaningful educational experience” is located at the intersection of “teaching presence”, “social presence”, and “cognitive presence”. According to the CoI website, numerous studies have utilized the questionnaires, including large-scale inter-institutional and cross-disciplinary investigations (Abbitt & Boone, 2021; Arbaugh et al., 2008; Garrison, 2016, 2018; Swan et al., 2008; Wei et al., 2020).

Review method

In constructing the framework of Parenting to Equip in Parenting–Harmonizing–Collaborating (PHC), the classic grounded theory research strategy was applied by interviewing Indonesian family enterprise founders’ anxieties to induce the latent variables that contribute to their anxiety-resolving behaviors. This qualitative methodology allows access to the viewpoint of individuals in the family business to provide insightful meanings to the research (De Massis & Kotlar, 2014; Fletcher et al., 2016; Nordqvist et al., 2008; Rovelli et al., 2022). Data were collected through theoretical sampling with a specific objective. Participants from the four (4) family businesses classified as conglomerates were also selected as part of the purposive sampling because the participants are genuinely willing to share about the strategic journey experiences in their respective family and business. This sampling process is key and yet challenging as family businesses are known to be notoriously secretive (e.g., Poza and Daughtery, 2014; Mackie, 1992).

Besides their contribution to Indonesia’s economy, these family conglomerates –the considered large family businesses- are unique for their modest beginning to fabulous wealth under the New Order of President Soeharto’s regime (1966–1998) (Chua, 2004; Mackie, 1991; Yew & Tan, 2022; Wijaya, 2019) and survive beyond the political and economic crisis in 1998 to still exist competitively by aligning their businesses to the regulatory boards, public interest watchdogs, the media, and some reform-minded politicians. The criteria of the sampled family conglomerates are as follows: (1) the company has existed for more than 30 years; (2) the third generation of the family has worked there; and (3) the company’s performance has been stable, particularly during the 1997 and 2008 Asian and US financial crises; and (4) the company’s net worth exceeds US$1 billion, according to Forbes’ 2020 Indonesia’s 50 Wealthiest lists. There were 28 participants interviewed, including founders (Generation 1/Gen 1), Gen 2, Gen 3, and senior executives with more than 20 years of experience. The transcripts of the interviews included field notes and indirect observations. Interview transcripts were coded to identify ideas for theory development.

Glaser’s iterative comparisons (Glaser & Hon, 2001, 2003; Cooney, 2011) shape the emerging categories: (1) comparing events to discover underlying similarities and differences; (2) comparing concepts to events to generate new concepts; and (3) comparing concepts to each other to discover the best concept via integration and decision-making. Memos would have assisted in the formation of the desired theory. Audit trails, peer debriefers, negative case analysis, data source triangulation, methods triangulation, prolonged engagement with informants, sharing individual interview transcripts, emerging concepts, and categories with participants strengthened the grounded theory method. The core categories were revealed by grounded theory, data collection, continuous comparison analysis, memo-ing, and theoretical sampling (Glaserian model): Parenting to Equip, Harmonizing to Prosper, and Collaborating to Endure are the primary conceptual categories.

Next, this study applied the integration approach as recommended by Mayer and Sparrowe (2013, p. 919) in Academy of Management Journal (AMJ) “Integrating Theories in AMJ Articles”, whereby one theory is applied to the domain of the other theory to “lend novel insight”. In this case, this study integrated the CoI model into the “Parenting to Equip” in the PHC model, as it requires scrutiny on each CoI component involved that generate educational experience for parenting the next generations in Indonesian family enterprises.

Discussion

The focus of this study is through the process of “Parenting to Equip” as shown in Fig. 3a–c, in order for the next generations to be the next leaders by Forging their Character, Molding them Strategically, and Cultivate their Entrepreneurship skills. The CoI is integrated as a learning model for “Parenting to Equip” in PHC for the following reasons: first, the CoI theory has been presented, discussed, tested, and criticized, yet it has persisted. Swan and Ice (2010, p. 2) attested that “since its initial formulation, educators worldwide have adopted and adapted the CoI framework. It has (also) been utilized in various ways to inform both online and blended learning research and practice.” Second, the theory incorporates the digital learning environment, which now requires decoding in light of the challenges posed by crisis situation like COVID-19 pandemic. Third, the CoI model incorporates the “social presence” element, which is a common and essential aspect of the family. A healthy family is characterized by social interactions that are enjoyable for all members.

Fig. 3

a–c “Parenting to Equip” emerging from the Parenting–Harmonizing–Collaborating (PHC)

The formality of learning in informality of learning

The learning experiences of many younger generations within family businesses were described by the PHC theory. Their parenting experiences are not solely informal learning opportunities. The older generations of family businesses have a strong and definite intent to ensure the intergenerational continuation of their businesses. In some ways, the family, as a common informal learning setting, becomes a more formal learning setting.

The Organization for Economic Cooperation and Development (OECD) describes formal education as “always structured and with learning objectives”. This type of learning typically takes place in institutions of formal education and training, such as schools and universities. There are similarities between informal and formal learning. This is the type of learning found in short courses. The learning is fairly structured and may have specific learning outcomes, but it is not typically a degree program. Numerous universities offer formal and informal learning, as well as degree and non-degree programs. Labor organization programs and professional associations provide additional examples of nonformal learning.

On the other hand, informal learning can occur anywhere, including the workplace and the home. Learning environments include museums, libraries, and playgrounds. Typically, these informal learnings lack clearly defined learning outcomes and are unintentional from the perspective of the learners. Students merely gained knowledge from their experiences. Parenting is an example of informal learning, which occurs naturally through daily life experiences rather than through a curriculum and predetermined formal learning outcomes. Informal learning within a family shares three similarities. It begins with parents serving as teacher, trainer, and mentor. Second, families can learn anywhere as they go about their daily lives. Third, this educational opportunity is exclusive to family members.

Integrating CoI to PHC’s parenting to equip

To summarize the process of the integration, first of all as shown in Fig. 4, the purpose of the guidelines in Parenting to Equip is to show there are three settings for learning in family businesses: “Family Setting for Learning”, “Firm Setting for Learning”, and “Family Firm Setting for Learning”. The researchers named it Family-Led Learning of Family Business (FLL-FB) because the family can take the initiative and leadership of the learning. Next, the elements of CoI are integrated into FLL-FB as shown in Table 1. They are how “Teaching Presence”, “Social Presence”, and “Cognitive Presence” can bring out the meaningful and profound experiences into the Family-Led Learning of Family Business (FLL-FB).

Fig. 4

Family Firm Setting for Learning, Family Setting for Learning, and Firm Setting for Learning (to be enhanced by CoI)

Table 1 The emergence of Family-Led Learning in Family Business (FLL-FB)

When commencing from Parenting to Equip, we found there are three possible learning settings. These are the “learning settings” where family influence is significant in determining the learning outcome and learning program for younger generations. The first setting (the left circle) is a learning experience within the family, also called the “Family Setting for Learning” derived from “Forging Character”. It is a learning experience in the family’s home or other informal locations. The second setting (the right circle) is learning from non-family executives within the family business, also known as the “Firm Setting for Learning” derived from “Cultivating Entrepreneurship”. The third setting is the vesica piscis—the overlapping middle area—named as the “Family Firm Setting for Learning” where learning within the family business occurs in conjunction with the family. It is when the older generations mentor the younger generations within their family business locations. This is derived from “Molding Strategically”.

Integrating the CoI model and the “Parenting to Equip” in the PHC model requires scrutiny on each component involved that generate educational experience for parenting the next generations in large family enterprises. The element of Teaching Presence is broken down in its questionnaire into “design & organization”, “facilitation”, and “direct instruction”. Social Presence is broken down into “affective expression” and “group cohesion”. Cognitive Presence is broken down into “trigger event”, “exploration”, “integration”, and “resolution”. Each questionnaire guides educational specialists to develop practical learning experiences that provide participants with a profound and meaningful education.

FLL-FB, which stands for Family-Led Learning of Family Business, may involve five distinct educator types. First is a “teacher” or someone who can impart new knowledge. Second, a “trainer” is an individual who can assist students in learning a new skill. The third element is a “coach” or someone with the expertise to guide the learners to their objectives. Fourth is a “mentor” or someone who builds relationships with learners and can share knowledge. Fifth is a “consultant” or someone with specialized knowledge who can advise on process and content as needed.

In addition, the FLL-FB allows three distinct groups to assume the role of “educators”. The members of the family include grandparents, parents, uncles, aunts, brothers, sisters, and cousins. The executives who work in the family businesses are the second group. Third are those within the family businesses who can contribute to developing the younger generation’s expertise. They could be business partners, consultants, clients, suppliers, certified mentors, or coaches.

When a family business disregards FLL-FB, the learning program may become “too informal” or “too nonformal”, which can result in two weaknesses. Initially, informal learning experiences tend to disregard the importance of deadlines and other devices for measuring learning outcomes. Second, informal learning programs typically disregard the presence of internal trainers, teachers, and mentors within families and family businesses. Without these internal educators, the younger generation will be deprived of the “original and historical knowledge” of family businesses. These internal educators are the only specific and unique family business knowledge sources. In conclusion, the FLL-FB concept can bridge the “gap” by providing a learning program that incorporates both approaches.

FLL-FB refers to a nonformal learning approach in an informal learning environment in family businesses that work to prepare their younger generation to become involved and, eventually, to lead the businesses. FLL-FB combines nonformal and informal learning characteristics. These characteristics are shown in the table below in Table 2:

Table 2 Characteristics of FLL-FB

Engaging in this type of educational experience has at least four repercussions. First, the complexity of the program necessitates the assistance of “education specialists” in designing and implementing the program. These professionals should be knowledgeable about family businesses, entrepreneurship, and formal and informal education. Second, given that FLL-FB is an educational program, the education specialist should be able to play a leading role in the program’s design and delivery. The third requirement is the support of the program by the “top” person(s) in the family business. Education is required to design and implement a learning program.

Conclusion

The CoI theory can improve the effectiveness of FLL-FB learning experiences for three reasons. First, “Teaching Presence”, “Social Presence”, and “Cognitive Presence” produce a “deep and meaningful” learning concept and environment. Second, the questions for evaluating CoI experience provide an education specialist with more specific information for theoretically designing the initial program. Thirdly, the CoI theory invigorates the PHC theory, particularly in underpinning the “how to implement” inquiries.

In Indonesian family businesses, it is nearly impossible for the CEO or “top” person to design and implement the program. It is difficult for a single individual to be a good CEO, parent, and teacher. Numerous CEOs and business founders are already preoccupied with numerous business responsibilities. This challenge invites new educators to participate; they are FLL-FB specialists who can contribute to the program’s design and management. The FLL-FB specialists have expertise in the family business, entrepreneurship, and education.

As illustrated in Table 3, a comprehensive implementation of FLL-FB in Indonesian family business could serve as a “Family Business Entrepreneurship Academy”. It is an internal “academy” that educates family members of family businesses in preparation for their involvement and leadership roles. This “academy” provides a structured yet individualized education to the younger generation, who are too young to be adults. The “academy” will manage their learning experiences from their parents, their parents’ employees, the factory, the suppliers, the customers, and other knowledge resources within the business circle of the family businesses. Learning environments can be found in the home, the office, the factory, the business meeting, and the business exhibition, among other locations. It demonstrates that the program is an educationally complex one that requires the presence of an educational specialist. For this reason, FLL-FB specialist could be a new field in family businesses.

Table 3 Guidance for applying the FLL-FB model

Academic researchers can conduct additional research on the intersection of nonformal and informal learning in family businesses. This paper focuses on the PHC theory investigated in Indonesia, with the participants being multinational corporations. Given the prevalence of family businesses, conducting similar research in other nations is possible. Overall, the FLL-FB framework consisting of teaching, social, and cognitive presence, enables individuals to interact with one another and develop latent knowledge and skills benefiting the family and business in the society.