Designing a Framework for Relating Leadership Style with Decision Making and Performance: an Empirical Study on Family Businesses of Punjab, India

Abstract

The present research analyzes the influence of leadership style on decision-making and performance of family businesses of Punjab, India. The main objective of the study was to identify the leadership style adopted by family business owners and design a model to relate leadership style with strategic decision-making and business performance, to assist them to improve their business performance by aligning their leadership practices with the demands of business environment. With the help of systematic literature review, the various dimensions affecting strategic decision-making and business performance were identified and are considered in the present study. A structured questionnaire was used for collecting data from family business owners of medium and large sized firms situated in state of Punjab, India. The data was collected in two phases. In the phase 1, the data was collected to identify the leadership styles adopted by the family business owners while in phase 2, the data was collected to study the influence of different dimensions affecting strategic decision-making and business performance of the family businesses. The study has used Partial least square- Structural equation modelling (PLS-SEM) to analyse the Interrelationship between leadership styles, strategic decision-making and business performance. The developed model highlights the existence of significant relationship between the strategic decision-making dimensions identified and business performance. The study also reveals that strategic decision-making acts as a mediating variable between leadership style and business performance. The generation wise analysis indicates the dominance of autocratic leadership style in generation 1 and transformational style in generation 2. The opportunities availed and the challenges faced by family owners were also analyzed. These opportunities and challenges were classified on the basis of: Leadership, Strategic decisionmaking and Business performance. These were identified on the basis of exploratory factor analysis (EFA). The overall mean of leadership opportunities and challenges was higher than that of opportunities related with strategic decision-making and business performance. VI Further this study also, took a case study analysis to validate the designed model, with data collected from 15 owners of medium and large sized firms of Punjab state. The analysis of case study revealed several opportunities and challenges faced by family firms. Measures were also suggested to overcome the business challenges. Family businesses need to take measures to improve their strategic decision-making and business performance by involving next generation in decision-making, through well-defined rules and regulations, to assist them to sustain competitive advantage.