Goals tensions: economic versus noneconomic goals

In seeking to make decisions, firm decision-makers in all firms, and family firms in particular, face temporary goal tensions, which cannot be solved, only managed. For instance, family firm decision-makers often emphasize non-economic goals that are significant to the family which may address family-related issues such as transgenerational succession, preservation of family harmony, family reputation and identity, or the perpetuation of family values. While, in the long run, economic and non-economic goals might converge, they often lead to decision-making tensions in the short run. Investigating the precise mechanisms through which family firms manage perceived tensions between economic and non-economic goals is important, as goals affect decision-making, which in turn determine the strategies that family firms pursue and, ultimately, their performance.

A sensemaking perspective

In our recent study, published in the Journal of Management Studies, we use a sensemaking perspective to understand how family firm decision-makers manage goal tensions and identify mechanisms facilitating the sensemaking–sensegiving process. We question, “how do family firms manage the tensions that can manifest between economic and non-economic goals when making decisions?”. To answer this question we use an in-depth, multiple case study analysis of eight private Irish family firms, comprising 59 interviews, 501 items of archival data and 39 observations. Based on our inductive analysis, we contend that the way that family firms manage goal tensions may be best understood through a sensemaking–sensegiving lens. We identify three sensemaking mechanisms – ensuring continuity in the family firm, preserving family cohesion, and delegating responsibilities to trusted advisors – that assist family firm decision-makers in managing these goal tensions. Moreover, we find that sensegiving based on three different values – sense of commitment, community embeddedness, and family firm identity – helps family firm decision-makers to justify and communicate their decisions. Our results reveal that when family firm decision-makers perceive a (temporary) goal tension, they attempt to reconcile their economic and non-economic goals by adopting a sensemaking mechanism related to the specific goal tensions, and thereafter, they use a sensegiving mechanism to justify and communicate their decision.

Implications for managing goal tensions

Our study contributes to a more granular understanding of the management of goal tensions in family firms. Prior research on family firm goals has acknowledged that these firms pursue both economic and non-economic. However, these works mostly studied under which conditions – e.g., good versus bad financial performance – economic or non-economic goals dominate. Our qualitative study allows us to move away from this ‘either/or’ approach. Instead, our analysis of the cases shows how family firms aim to balance conflicting economic and non-economic goals, depending on the specific goal conflict. Furthermore, our research advances knowledge on sensemaking in family firms by revealing how sensemaking can explain idiosyncratic family firm behavior and how family firm decision-makers use specific values when ‘giving sense’ to justify their decisions. Lastly, our study might inform research on mixed gambles, as the trade-offs of non-economic versus economic goals go along with potential gains and losses that family business decision-makers need to consider in a complex sense- and decision-making process.