Family firms and control system design – a socioemotional wealth perspective

The aim of the Essex Accounting Centre (EAC) research seminar series is to support our world-class research activities in five key areas: accounting and global development; capital Markets, audit, regulation & reporting; publicness and resilience, precarity, exclusion & social justice; and environment, climate change & vulnerability. The seminar series is also expected to promote inter-disciplinary research that links the work of members of the centre with others both within the university and with external institutions.

Family firms play a considerable role in the global economy, creating a significant amount of wealth and employment worldwide. Despite the prevalence of this organisational form, research on the design and use of management accounting and controls practices and the role of management accounting in family firms remains under-developed. This has prompted recent calls by influential voices within the management accounting literature to increase our knowledge of the impact/consequences that family firms have on accounting practices (Sandgren, et al, 2023; Prencipe, Bar-Yosef and Dekker, 2014).

A decade on, studies on the same remain sparse and our understanding of the workings of family firms and the role of accounting in them remain under-developed (Najera and Collazzo, 2021). Responding to this call, this study aims to contribute to the management accounting literature by providing a comprehensive description of management control structure in a large family firm while engaging with the concept of socioemotional wealth, to extend our perspective around how MCS are designed and used in family firms (Jain, et al, 2023). The findings from the study illustrate how SEW affects the application of performance planning and evaluation controls in our case setting.  We particularly note the role of organisational structures in mobilising how SEW is generated and preserved. We also note the novel way in which tight budget targets are applied and used, and the continuing persistence of group rewards across the most senior levels of the organisation (for both base salary and bonus determination) and separately, across junior employee levels within separate business units, even when tasks in these business units are highly individualised and differentiated. We attribute the stronger organisation-business unit performance connection to the high emphasis on SEW in the organisation.

Our findings broadly speak to the significance of SEW as a driver for the way in which accounting controls are designed and used in organisations as they relate to organisation structure, and the strong persistence of tight budgetary targets and group rewards.