Tightly held companies and corporations are often controlled by a small group of family members. As such, when it is time for a change in leadership (due to a retirement, for example), many times the role is filled via an internal promotion.
Peter Jaskiewicz, an associate professor at Concordia University’s John Molson School of Business, suggests that the company might benefit by an outside hire.
Broadly, Peter Jaskiewicz conducts quantitative and qualitative research on family business and entrepreneurship. His current research interests involve transgenerational entrepreneurship, executive team compensation, nepotism, and succession planning. His research has been published in journals such as Journal of Management Studies, Family Business Review, Entrepreneurship Theory and Practice, Journal of Small Business Management, Journal of Business Research, Journal of Family Business Strategy, and Entrepreneurship and Regional Development.
In his teaching, Jaskiewicz shares up-to-date knowledge on management, entrepreneurship and family business with Bachelor, Master and PhD students. Jaskiewicz also organized an annual MBA Summer School on “Leadership in Europe” (2006-2008) and developed an annual European Study Tour on “Governance, Entrepreneurship and Family Business” (2009-2013).
Peter Jaskiewicz – Family Business
While family CEOs tend to focus on family values and continuity, those from outside the family champion innovation. Which type of CEO is better for a firm depends on the industry!
From the Hiltons to the Murdochs, families have long sought to keep their businesses in the bloodline. But my new research from the Concordia School of Business suggests that’s not necessarily the best method of management. Together with my co-author Andrew Luchak, I argue that if the family business is part of a traditional industry built on quality and reputation, a family member would make a good CEO.
But if it operates in an industry that values innovation, and the firm has to stay on the cutting edge, it’s best to look elsewhere for leadership.
In traditional industries, it’s all about preserving the tradition, ensuring that quality and reputation of the firm remain high. The way families work and run family firm is key to doing exactly that. But that doesn’t work in newer industries where it’s all about constant innovation in rapidly changing environments. Because family CEOs tend to focus more on family values and continuity, while non-family CEOs seek to innovate, a CEO from outside the family circle might be a better choice in industries that prioritize pushing boundaries over preserving tradition.
Traditional family businesses, then, like food producers, service providers or wine makers — businesses in which quality and reputation are core values and instrumental to firm performance — can benefit from keeping things in the family.
By contrast, innovative businesses, such as those in the information technology sector, cellular communications or pharmaceuticals, would be better off hiring from outside the inner circle. An empirical study of Italian family businesses that our research builds upon finds exactly that: Firms with family CEOs outperform in traditional industries but underperform relative to non-family CEOS in innovative industries.