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Formal human resource practices in family firms

Formal human resource practices in family firms PurposeThe importance of formal human resource (HR) practices is widely recognized in management literature, but under-researched in the small business and family firm domain. Previous research indicates that family firms rely more on informal HR practices, based on social networks. However, given the heterogeneity of family firms, one cannot assume that all family firms are reluctant to formalize their HR. As the CEO is the key decision maker who covers HR management in family firms, the effect of the CEO type on formal HR practices will be studied. The paper aims to discuss these issues.Design/methodology/approachBased on a large-scale survey, resulting in a response of 532 family SMEs, the authors perform a hierarchical regression analysis studying the effect of a family/nonfamily CEO on the use of formal HR practices, introducing several moderating effects: CEO generational stage, tenure and education.FindingsResults indicate that family firms with a family CEO have more formal HR practices than those managed by a nonfamily CEO due to higher levels of goal alignment and intentional trust between the owning family and family CEO. Moreover, family firms managed by first generation family CEOs and family CEOs with a higher education have more formal HR practices.Practical implicationsThe findings suggest that family CEOs can be equally or even more able as nonfamily CEOs to run a family firm in a formalized/professionalized manner.Originality/valueGiven the scant amount of research on HR formalization in family firms, even though literature documents performance increasing effects, this study fulfils the need to study the effect of the CEO on HR formalization. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Family Business Management Emerald Publishing

Formal human resource practices in family firms

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2043-6238
DOI
10.1108/JFBM-07-2016-0016
Publisher site
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Abstract

PurposeThe importance of formal human resource (HR) practices is widely recognized in management literature, but under-researched in the small business and family firm domain. Previous research indicates that family firms rely more on informal HR practices, based on social networks. However, given the heterogeneity of family firms, one cannot assume that all family firms are reluctant to formalize their HR. As the CEO is the key decision maker who covers HR management in family firms, the effect of the CEO type on formal HR practices will be studied. The paper aims to discuss these issues.Design/methodology/approachBased on a large-scale survey, resulting in a response of 532 family SMEs, the authors perform a hierarchical regression analysis studying the effect of a family/nonfamily CEO on the use of formal HR practices, introducing several moderating effects: CEO generational stage, tenure and education.FindingsResults indicate that family firms with a family CEO have more formal HR practices than those managed by a nonfamily CEO due to higher levels of goal alignment and intentional trust between the owning family and family CEO. Moreover, family firms managed by first generation family CEOs and family CEOs with a higher education have more formal HR practices.Practical implicationsThe findings suggest that family CEOs can be equally or even more able as nonfamily CEOs to run a family firm in a formalized/professionalized manner.Originality/valueGiven the scant amount of research on HR formalization in family firms, even though literature documents performance increasing effects, this study fulfils the need to study the effect of the CEO on HR formalization.

Journal

Journal of Family Business Management – Emerald Publishing

Published: Jul 10, 2017

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