Frontiers of Entrepreneurship Research
1997 Edition

SUMMARIES

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PROCESSES IN OWNERSHIP AND MANAGEMENT IN GROWING MEDIUM-SIZED ENTREPRENEURIAL COMPANIES


SUMMARY

Names POSTER
Hans Crijns
Hubert Ooghe

Address
De Vlerick School voor Management
Bellevue 6 - 9050 Gent - Belgium

Telephone Fax
32-9-210-98-15 32-9-210-97 00

Principal topics
Changes and critical incidents in management and ownership of growing medium-sized entrepreneurial companies in Belgium were studied. In order to develop a framework relevant to owner-managers of growing medium-sized businesses, a set of resources making the interface of management and ownership has been identified ( continuity factors").

These factors, representing important cross-roads in the decision making process, are grouped in subsets :

· the growth orientation
· the shareholders'structure
· the role of the Board of Directors
· the portfolio structure
· the strategic planning process
· the growthpath

The cross-roads indicate processes in management and in ownership of entrepreneurial firms. They may be linked to the size of the company (or portefolio)

Method
The study uses the data from a group of 26 Belgian entrepreneurs, i.c. owner-managers of medium-sized firms. They describe their portfolios as growing companies (with a history of growth and with growth-perspectives). A sample of 26 entrepreneurial portfolios (with at least one medium-sized company) has been investigated during a three year period (1993/1996).

The companies have the following characteristics :
- number of personnel : minimum 50
- owner-managed : the entrepreneur is CEO (of at least one company in the portfolio) and (controlling) owner
- growth in turnover ànd in employment during the last 5 years

The companies are situated in various sectors : manufacturing, distribution, services.

The information was collected by semi-structured interviews (with the individual entrepreneurs); reporting (in plenary sessions to the entrepreneurs); written questionnaires (each
entrepreneur was given the opportunity to self-positioning); group-discussions (with the 26 entrepreneurs in the Impulse Centre "Growthmanagement for medium-sized enterprises"). Questions focused on strategies for growth, the portfolio structure, the shareholders, financing growth, governing structures. Critical incidents and the evolution of these factors in the history of the company were of special interest.

Major Findings
On the basis of the collected cases, we look -together with the entrepreneurs- for an evolutionary approach in the growth process of the medium-sized entrepreneurial company. The results show significant differences among the companies and portfolios. We elaborate on two processes : the process in management and the one in ownership.

The process in ownership consists of evolutions that indicate the "institutionalization of ownership," with the transition from a closed towards an open ownership structure:

· where the growth-orientation evolves towards company-value
· where the ownership structure evolves from closed to open
· where the membership of the Board evolves from closed (to owner-manager and/or
family) to open (to external or/and non-family)
· where the portfolio-structure evolves from simple and non transparant to complex
and transparant.

The process in management consists of evolutions that indicate the "professionalization of management", with a transition from an operational towards a professional management:

· where the strategic planning proces evolves from informal to formal
· where the role of the Board of Directors evolves from passive to active
· where the growthpath evolves from internal towards internal ànd external
(acquisitions).

The processes in management and ownership are influencing each other and form a self-supporting cycle of relationships. They are embedded in a dynamic process at which the evolution of all these factors does not occur at the same time, so we can speak of a "transition stage". This stage is related to the size of the company or portfolio (may be measured by turnover and number of personnel).

Implications
The framework specifies factors that are crucial for the continuity of the owner-managed firm. Entrepreneurs would maximize their efforts and value creation if they could have an agenda on the professionalization of management and the institutionalization of ownership in the companies and portfolio. For practitioners and students, the results depict some specific aspects in the interface between ownership and management of entrepreneurial companies and in transitions as they grow.

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Last Updated 04/25/98