Today, we are continuing our article series with a brand new episode! If you missed the first episode, here is the link.
It is a weird topic to write about, but I did some research so... Anyways, we are here to broaden our vision! I am not limited to boring textbook info and can explain other things in a fun way if you want... I HIGHLY RECOMMEND YOU TO READ EARLY EPISODES FIRST!
Family and Professional CEO: Which One is More Appropriate? In What Conditions?
A basic approach leads researchers to state the advantage of the family CEO because of its detailed knowledge of the family and the company as well as its strong commitment to family business’s long-term success (Zellweger 2007). It is emphasized that longer tenure of the family CEO decreases the short-term success pressure and gives the CEO a chance to seize the long-term investment opportunities (Zellweger 2007). In addition, the family CEO tends to consider the success of family company beyond their period because of the emotional connection with next generation (Zellweger 2007). On the contrary, it is also indicated that, the family CEO usually tends to have some non-financial goals such as preserving the control on the family which drops the profitability of the company (Miller et al. 2014).
Still, most of the studies propose the supremacy of a professional CEO because of its industrial knowledge, management abilities and expertise (Miller et al. 2014, Chrisman et al. 2014). Mathematically, the large labor market of non-family CEOs compared to the limited pool of family CEO candidates creates a higher probability to find a more talented professional manager (Chrisman et al. 2014). In addition, non-family CEOs, as members of labor market, are more successful to hire talented employees because of their larger social network and broader information about available professionals (Chrisman et al. 2014). The short-term success pressure forces the non-family CEO to search for new opportunities and adapt risky strategies which creates dynamism in the company (Khanin et al. 2020). The non-family CEO has no interest on gaining power inside the family; therefore, the financial motivation of the non-family CEO always guarantees the profitability of the company (Miller et al. 2014). However, in case the family insists to dominate the management, the shared power can decrease the overall management ability of the family and non-family CEO (Miller et al. 2014). In addition, researchers point out that the family’s tendency to hire a non-family CEO with a complete consensus of ideas is a major reason for the low performance of the non-family CEO (Miller et al. 2014).
On one hand, there are specific advantages of having a family CEO and non-family CEO based on differences of their origins and interests. On the other hand, both types of CEOs have unique disadvantages which can be deathly for the company at some point. So, an innovative approach may be using combination of different managerial techniques of different CEO types during the lifetime of the family enterprise.
OK, let's stop here for now. The topic will develop further and I ensure that you will gain a different perspective. When you are tired of the bad news about crypto, come here.
