It’s not surprising to see researchers and governance institutions put more weight on the type of firms with the most impact on the economy, which is where the family firm represents 90% of companies operating in Yemen. The family firm is a mixed combination of business, family, and ownership, and the constant intertwining of these three groups may result in different points of view of the members within these groups of the same business. Family firms are also different from each other regarding different generations’ styles of management, the authority assigned to the managing/owning family members, and the family culture since only one family often owns each family firm in Yemen.
This difference leads to the heterogeneity of governance structures among family firms which yields different performances and therefore confuses family firms that wish to govern their businesses while raising a question as to the best practices in that regard.
However, family culture is one of the most important factors affecting the success of family business governance. Family culture functions as an informal governance mechanism through the values emphasized in formal and informal family meetings, family councils, and the family’s vision as stated in the family constitution, which in turn can influence the strategic choices of the family firm. More specifically, values act as a guide for the three pillars of family firms: the family, the business, and the owners which define a desirable performance output that often reflects the philosophy of the business founder as seen in some successful family firms in Yemen such as Hayel Saeed Anam Group.
Informal governance structures can also enhance a family culture by emphasizing family values that help these structures (family gathering/family council) in resolving conflicts, formulating strategies, and maintaining family unity through family values and the company’s vision.
Despite the reluctance of many family firms to engage in developing governance structures needed to maintain business sustainability and continuous improvement as they grow, the name of the family firm which is usually derived from their family name is treated as a legacy that must be preserved by the owners and so becomes part of the family culture. This is later translated into relevant policies and procedures to which the family members are committed.
Hence, the role of family culture emerges as a crucial input for developing family governance structures, initially helping to preserve the values of the founder and the family that influences decision-making and eventually contributing to the development of formal governance structures for the family business.
Finally, many recent studies have proven the paramount importance of family culture and its impact on organizational innovation of family firms that developed governance structures in which family culture and values are emphasized and so yield the best practices in the course of their businesses which is pretty much needed by many family firms in Yemen.
