Today, we are continuing our article series with a brand new episode! If you missed the other episodes, check my account.
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!
Maturity of Large Size Businesses
After an uncertain phase of expansion, the firm turns to an adult with its own personality. In the level of maturity, the dynamism in the business decreases as well as the profit margins and the completion in the market turns to a real problem. The products of the company mostly become an ordinary item in the market and the sales stops growing at sustainable levels and even drops (Gersick et al. 1997). Although achieving successful results becomes a harder task, the strong organizational structure of the company generates stability by other forming functional units as sales, finance and marketing or building business units (Gersick et al. 1997). Under the old-school image of the company, there is a history of survival, growth, and prestige. But maturity may be the last stage of a company before its death in case no action is taken. A modernization process, search for a new direction and possible spinoffs are some scenarios a mature company consider (Gersick et al. 1997). The purpose of this type of behaviors is re-achieving start-up or expansion phase characteristics. Therefore, needs of a mature company who search for an exit point is refocusing its attention, searching for reinvestment opportunities, modernizing its organizational structure to prevent inefficiency and a strong commitment to the compony and company’s future in the level of owners and managers. So, what can a family CEO and a non-family CEO offer to the family business in the maturity period?
Research shows a decline in the relative performance of the non-family CEO compared to the family CEO in the family businesses when the firm reaches a reasonable size and stability (Khanin et al. 2020). The paper adds that high performance of the professional CEO mostly does not related with its superior managerial skills or industrial knowledge, it is majorly dependent on the ability of professional CEO to transform organizational structure of the family company and its outdated management methods (Khanin et al. 2020). It is seen that after the transformation is completed, relative advantage of a non-family CEO disappears. Its not a coincidence that the end of the advantageous position of the professional CEO comes across with the transition of company from expanding period to maturity period. The stable organizational scheme of the mature company does not require additional formalization or professionalization. Now the requirement of the company is modernization and dynamism which is the spirit of founders. It requires a strong commitment to the family business, and it can be hypothesized that the rebirth of the company can be achieved best by the family members who know the values of the company best and care the legacy of the founders most. Researchers also explain the success of the family CEO in the mature businesses by their commitment to family, deeper understanding in the traditions of the company, socioeconomical motivations and highly prioritized long-term targets (Khanin et al. 2020, Kotlar and De Massis 2013, Gomez-Meija et al. 2014). However, it is also added that family CEOs often tend to underemphasize short-term gains of the family company and is not much successful at balancing different levels of goals related to owner’s personal growth, job security of employees and production lines (Khanin et al. 2020, Gomez-Meija et al. 2014). But the sort-term success pressure of professional CEO is so high that maximizing long-term gains of the family company is not even a concern. Some exceptional cases where non-family CEO effectively integrated with the targets of the family is always exist (Miller et al. 2014) but it is not a deal breaker. Therefore, it can be concluded that the family CEO’s commitment to the family and its motivation for long-run targets of the company make family CEO a more candidate for the successful management of the company when it is in maturity and at a reasonable size.
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.
