ABSTRACT
This exploratory study contributes to the United States family businesses literature by investigating the relationships between the percentage of non-family-member managers in a family business and a variety of management activities, styles and characteristics of that business. The research design is survey data collection with a sample of 159 family businesses. The regression findings used to test nine hypotheses indicate that although the nine independent variable model is significant, only the percentage of women involved in the operation of the business and the use of sophisticated financial management methods are significantly related to the percentage of non-family managers. Implications for family firm owner/managers, for consultants to family business, and for researchers are presented.
INTRODUCTION
Family businesses often employ non-family-members as managers. The purpose of this study was to investigate this issue with regard to how the inclusion of non-family-member managers relates to various managerial activities, styles and practices in such firms. The terms "family business" and "family firm" will be used interchangeably throughout this article.
This study contributes to the literature on family business, as there has been limited research into the issue of family managers (FM's) versus non-family managers (NFM's) in family businesses. Chua, Chrisman and Sharma, who have conducted a number of empirical studies in the field of family business, concluded that "issues related to non-family managers [in family firms] have received very little attention by researchers" and "there is definitely a gap in our understanding of the role played by non-family managers in the family business" (2003, pp. 102, 103).
These researchers, and others in the field of family business, continue to recognize a significant gap in the literature with regard to the issue of family-member versus non-family-member managers in family firms. Chrisman, Chua, and Sharma (2005) stated that many questions remain unanswered and much interesting research remains to be done to determine how family involvement affects firm performance. Similarly, Ensley and Pearson (2005) concluded that family business research needs to identify the nature of family involvement in top management teams, and Nordqvist (2005) agreed that this is a breach in the literature that has not received much attention. Chrisman, Chua, and Steier also concurred with the need to better understand top management teams in family businesses as "this is a topic of great importance since the decisions of top mangers may determine the extent to which a family business obtains distinctive familiness and superior economic performance" (2005, p. 241).
The importance of this study is that it brings new empirical research to these issues of FMs and NFMs in family business management, adding to the limited prior empirical studies. The results of this research should be of value not only to current and future researchers in this area, but should also be of value to consultants to family businesses and to family business owner/managers themselves, both of whom may gain insight into the possible impact of having non-family managers in family businesses.
MANAGEMENT ACTIVITIES, STYLES AND CHARACTERISTICS
Definitions of a "family business" generally include the criterion of the prevalence of family members in the management team (yet some definitions allow for the possibility of family ownership without any family-member-managers). Still, an extensive review of the family business literature revealed few academic papers or journal articles that investigated the impact of NFM's on the management activities, styles and practices of family firms. Those papers and articles that did touch on this topic usually did so in a tangential manner and/or in a conceptual or anecdotal method, rather than via empirical investigation. Still few in number, but somewhat more frequent were papers and articles that compared family businesses and non-family businesses, which is an issue quite different in nature. Another related but again a different issue is the use of non-family-members on the corporate or advisory boards (but not in the management) of family firms, a topic occasionally investigated and the (largely anecdotal and conceptual) focus of an entire issue in the first year of publication of the Family Business Review (1988 v.1 n.3).
Yet some prior studies did indeed investigate FM's and NFM's in family firms. Several analyses have focused on the issue of how a family firm CEO should adapt to working with non-family managers, and the difficulty of delegating managerial responsibilities to non-family-members (Firnstahl 1986; Goffe & Scasse 1985; Hofer & Charan 1984; Mathews 1984; Perrigo 1975). The reverse issue--how to facilitate the adaptation by the non-family-manager to the family firm's culture and goals-was considered by Dyer (1989) and by Mitchell, Morse and Sharma (2003), who pointed out that NFM's must adapt to the family firm and need assistance in doing so. Other investigations regarding FM's and NFM's focused on compensation for NFM's (McConaughy 2000; Poza, Alfred & Maheshawi 1997), and on retention of NFM's (Ward 1997). And Gallo and Vilaseca (1996) investigated the possible performance benefits of family firms with NFM's versus those without.
Agency theory has been used to explain and understand the relationship between FM's and NFM's in family firms (Chua et al. 2003). These researchers empirically investigated the percentage of NFM's in the management team of a family firm and its relationship to the FM's concerns about their relationships with NFM's. Among their conclusions was that past assumptions of zero or low agency costs in family firms require further thinking, as these costs are more complex and asymmetric than previous supposed.
Other studies, most being anecdotal and conceptual, relate the advantages and disadvantages of family-members versus non-family-members as managers of family firms. Some of these studies see positive benefits of FM's, such as extra-ordinary commitment (Donnelly 1964; Horton 1986), more warm, friendly and intimate relationships within the management team (Horton 1986; Staff 1981), the potential for deep firm-specific tacit knowledge, often based on early involvement in the firm (Lane & Lubatkin 1998), governance advantages (Carney 2005), and the creation of a synergy in the top management team due to higher cohesion, potency, and positive task conflict (Ensley & Pearson 2005). Marcus & Hall (1992) …
