Are All Non‐Family Managers (NFMs) Equal? The Impact of NFM Characteristics and Diversity on Family Firm Performance
15 Pages Posted: 11 Nov 2016
Date Written: November 2016
Manuscript Type. Empirical.
Research Question/Issue. Although non‐family managers (NFMs) can be expected to influence firm performance, this issue is largely under‐investigated. In this study, we examine how diversity inside the non‐family component of the top management team (non‐family team, or NFT) influences family firm performance. More specifically, we investigate the performance effects of three specific sources of NFT diversity (NFT size; NFT tenure diversity; and NFT dominant functional diversity).
Research Findings/Insights. The analysis of 584 survey responses by top managers representing 97 complete NFTs (and the related top management teams, TMTs) out of the top 500 family‐controlled firms in the Italian furniture industry indicates that (1) NFT‐dominant functional diversity improves firm performance; (2) a U‐shaped relationship exists between NFT tenure diversity and family firm performance; (3) an inverted U‐shaped relationship exists between NFT size and family firm performance. Additionally, we show that the relation between non‐family manager characteristics and firm performance is moderated by family dominance in the entire TMT, that is, the proportion of family to non‐family managers.
Theoretical/Academic Implications. Our results call for further exploration regarding the demographic characteristics of non‐family managers and their effect on the performance of family firms. In this way, they have several implications for the family business literature, contributing to the growing debate on the socio‐emotional wealth (SEW) perspective of family firms’ behaviors. Moreover, our results highlight the importance of better contextualizing research on strategic leadership and strategic leaders.
Practitioner/Policy Implications. Our study suggests that the choice of outsiders should take into account not only their “market value” and reputation, but also the attributes of other NFMs among the company's executives, providing guidance to family owners in their decisions about professionalization.
Keywords: Corporate Governance, Top Management Team, Non‐Family Team, Family Dominance
Suggested Citation: Suggested Citation