A hard line between family and money
by Alexandra Brown
Pay differences between workers in a family business can have a very different effect than they do in a non-family business according to a new human resources researcher at UniSA.
Dr Shruti Sardeshmukh recently joined UniSA from Ball State University in Indiana. She did her PhD at Rensselaer Polytechnic Institute in Upstate New York where she collected data on human resources issues in family firms.
Dr Sardeshmukh (pictured), discovered that the nature of family firms may create unique consequences for human resources practices, especially compensation systems.
"I found that in family businesses the standards around paying for perform-ance and creating pay dispersion are a bit different," she said.
"In family firms pay dispersion has a stronger negative effect while it can actually have a positive effect in non-family firms."
Economists conclude that less pay dispersion is necessary in groups to reinforce desirable social behaviours such as cooperation, communication and effort. Alternatively, wage dispersion can be a useful motivator of work behaviours and encourages competition among employees to achieve higher levels of rank and pay.
According to Dr Sardeshmukh, compensation and pay dispersion in family firms is often a difficult and conflict-ridden issue for decision makers.
Research shows compensation for relatives is likely to be based on a combination of economic and non-economic principles and may generate all kinds of dysfunctional processes in the firm.
"When family members become a part of the team they bring with them established patterns of communication, affection and understanding," she said.
"They also bring with them expectations of justice which are rooted in the family sphere.
"This causes problems as members of the family may offer differing patterns of skills and competencies as inputs, yet may expect equal compensation."
She said in non-family firms, short-term pay increases for short-term achievement leads to decreased dynamics, while long-term pay dispersion creates positive responses.
The expectation is that better performers will be rewarded more in the long run, therefore enhancing certain team dynamics in non-family firms.
"When designing compen-sation and bonus systems you have to take into account the conflict it may cause, and decide whether you pay for performance and then whether workers get paid depending on individual or team performance."
Dr Sardeshmukh also studied training systems in family firms and found that there is benefit to sending the younger generation to work outside the family business for a while and then bringing them back to be trained and work in the family firm.
Dr Sardeshmukh is currently working with the family business data she collected in the US and is looking to collect similar South Australian data.
"I will be interested to see if the same things apply here when I connect the data," she said.
Dr Sardeshmukh is also busy working on a new course called Rewards and Recognition and will be co-teaching a second course for the School of Management at UniSA called Corporate Entrepreneurship.
Not only does she have a lot to offer the University in terms of her own skills and knowledge, Dr Sardeshmukh shows an obvious passion for her research and is excited about working at UniSA.
"It’s a great department," she said. "It is probably one of the best HR departments in Australia."
Dr Sardeshmukh completed her undergraduate degree in Psychology in Bombay, India, and a Masters in Manage-ment the India Institute of Management in Calcutta,
Dr Shruti Sardeshmukh worked collaboratively on this research with Michael D Ensley and Allison W Pearson.