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A multi-layer organisational culture framework for enhancing the financial performance in tourism and hospitality family firms

By Dr. Thilini Chathurika Gamage and Prof. Kayhan Tajeddini
As the contemporary business landscape becomes progressively competitive, vibrant and indefinite, becoming entrepreneurial and achieving strategic competitiveness has remained highly challenging to tourism and hospitality family firms. These challenges are exacerbated when family firms fail to understand the factors influencing their performance. While financial performance forms a fundamental goal for tourism and hospitality family firms, to date, tourism and hospitality literature profoundly leaned on family-level traits, for example, generational involvement, family involvement in ownership, governance and management in comprehending how family firms can become entrepreneurially-oriented and thrive in performance.
However, focusing only on family-level traits may represent a simplistic theoretical standpoint limiting our ability to capture the contribution of firm-level organisational culture mechanisms and non-family employees in enhancing the performance of tourism and hospitality family firms in rich detail. Nonetheless, in today’s increasingly competitive business landscape, tourism and hospitality family firms require an organisational culture mechanism that fosters strong social bonds among their employees outside of conventional formal bureaucratic structures to foster stewardship motives, thus allowing them to exploit novel business opportunities.
Although several scholars have applied organisational culture as an integrated theoretical perspective to fill the void among family-level traits and firm-level business processes in enhancing business performance in the family business realm, the notion of organisational culture seems to be under-researched in tourism and hospitality family business research to date. Moreover, of the few studies that examined the effect of organisational culture on business performance of tourism and hospitality family firms, none of these scholars have considered the organisational culture notion as “a complex, patterned, multifaceted human socio-technical system”.
In light of these considerations, we adopted the multi-layer organisational culture theory suggested by Schein (1995) as the theoretical underpinning in capturing the organisational culture mechanism through which tourism and hospitality family firms enhance financial performance. Accordingly, we portrayed organisational culture as a multi-layered phenomenon, consisting of (a) deeply embedded core values shared among family members and (b) salient climates that employees perceive throughout the family firm.
As shown in Figure 1, the theoretical framework that evolved from our work proposes a holistic theoretical illustration of how tourism and hospitality family firms can translate family-level values into firm-level business processes in enhancing financial performance. The rationale suggests that long-term-oriented values and entrepreneurial spirit provide a family firm with a better understanding of a pragmatic futuristic viewpoint instead of a conservative historical event. This subsequently leads to fostering a stewardship climate characterised by the higher level of commitment among managers and employees to the success of the family firm, thus ultimately leading to superior financial performance.
We employed the exploratory sequential mixed methods approach wherein an initial qualitative data collection and analysis phase was followed by a quantitative instrumental phase. Since the notion of organizational Culture is relatively unexploredin the tourism and hospitality setting, eight in-depth interviews with tourism and hospitality family firm owner-managers were used to uncover the complex organisational culture mechanisms in family firms and provide a profoundly characterised and realistic viewpoint on the phenomenon. Findings from the in-depth interviews were used to fine-tune the proposed multi-layer organisational culture framework to address the void concerning combining family-level values and firm-level business processes to enhance the financial performance of family firms. The proposed theoretical framework was then empirically tested among top-level management of 187 tourism and hospitality family firms using a questionnaire survey. The tourism and hospitality industry in Sri Lanka has been chosen as the context for this study as it is one of the prominent business sectors that significantly contribute to the country’s economy (contributing 12.6% of the country’s gross domestic product in 2019) with a competitive advantage due to its unique geographical location, tradition and cultural practices.
Our findings indicate that stewardship climate inside tourism and hospitality family firms mediate the relationship between long-term-oriented values and financial performance. This relationship is more robust in a high stewardship climate than in a more negligent climate. Moreover, we uncovered that entrepreneurial orientation moderates the relationship between long-term-oriented values and the stewardship climate of the tourism and hospitality family firms.
Our paper makes vital contributions to tourism, hospitality and family business literature in three ways. First, while previous literature is over-simplistic in viewing family-level traits as factors influencing the performance of family firms, we introduced a more holistic perspective. Specifically, our empirical work presents a multi-layer organisational culture framework illustrating how family-level values can be translated into firm-level business processes through specific organizational culture mechanisms to enhance firm performance. By proposing such in-depth depictions of different organisational culture layers, the fundamental processes that mediate between the layers, and how these boost firm performance, we provided novel insights into the family business and tourism and hospitality literature.
Second, this study appends to the topical discussion in the extant literature over whether long-term orientation and entrepreneurial orientation are essentially opposed to each other or might be mutually beneficial. Our findings indicate that long-term-oriented values cultivate a climate of collective stewardship throughout tourism and hospitality family firms and entrepreneurial orientation moderates this relationship. Third, in line with the stewardship theory, the proposed organisational culture framework uncovers the pivotal role of non-family employees as stewards in achieving the firm’s goals despite personal goals in the tourism and hospitality context. This is particularly important as employees are identified as one of the essential strengths of the tourism and hospitality industry due to their vital contribution in managing the complexity of providing unique and memorable tourism experiences to guests.
Our findings offer several valuable insights for family firm owners in general and those operating in the tourism and hospitality industry in particular. One of the critical contributions of our paper is that family firm owners and managers who show patience for future profits and delayed payback can create a stewardship climate conducive to risky long-term investments. As we uncovered, long-term orientation can increase a firm’s tolerance for experimentation, inspire foresight into forthcoming trends, and take time to tolerate uncertainty before responding.
Moreover, we found that a stewardship climate marked by employee empowerment and involvement fosters new viewpoints and different voices, allowing a tourism and hospitality family firm to stimulate pro organisational behaviours offering authority and discretion for employees. Such initiatives collectively promote better stewardship levels through employees’ commitment to the firm and its goals, consequently improving its performance in the long run.
Schein, E. H. (1995). The role of the founder in creating organisational culture. Family Business Review, 8, 221-238.
(This article is an extract of the research paper Gamage, T.C. and Tajeddini, K. (2022). A multi-layer organisational culture framework for enhancing the financial performance in tourism and hospitality family firms. Tourism Management, Forthcoming. – Please refer to the original research paper for the detailed version)

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